Mozambique must maintain fiscal consolidation and ease monetary policy

The International Monetary Fund (IMF) argues that Mozambique should continue fiscal consolidation in order to reduce debt needs, signaling that an easing of monetary policy is justified, indicates a report published.
“Continued fiscal consolidation is important to reduce financing needs and contain public debt vulnerabilities. With inflation expectations well anchored, fiscal consolidation underway and weak growth in the non-mining sector, a gradual easing of monetary policy is justified,” reads the IMF report on the approval this month of the third evaluation of the implementation of the Extended Credit Facility (ECF) program for Mozambique.
Also in the report’s recommendations, the IMF points out the “importance” of continuing with “sustained efforts to strengthen institutions and governance”, and thus “limit vulnerabilities to corruption and promote the development of the private sector”.
With the approval of this third tranche, total disbursements to Mozambique under this 36-month IMF ECF amount to around 273 million dollars (249.2 million euros). This ECF program was approved in May 2022, and provides total financing of 456 million dollars (416.2 million euros) to Mozambique.
The governor of the Bank of Mozambique said in November that the current slowdown in inflation was the result of the “restrictive monetary policy stance” adopted in recent months by the central bank, but stressed that “high uncertainties prevail.”