An IMF team, led by Mr. Pablo Lopez Murphy, conducted discussions with Mozambican authorities about the Fifth and Sixth Reviews of the ECF arrangement from February 19 to March 4, 2025. The talks addressed necessary fiscal policies amid economic contractions attributed to social unrest in 2024, with a projected growth recovery for 2025. Future discussions will continue virtually.
From February 19 to March 4, 2025, an International Monetary Fund (IMF) team, led by Mr. Pablo Lopez Murphy, held discussions with Mozambican authorities regarding the Fifth and Sixth Reviews of the Extended Credit Facility (ECF) arrangement. The meetings were deemed productive, with plans for further virtual discussions in the future.
At the conclusion of the visit, Mr. Lopez Murphy noted that constructive dialogue focused on necessary fiscal, financial, and structural policies that would facilitate the reviews’ completion. Economic activity reportedly contracted in the last quarter of 2024, with real GDP declining by 4.9 percent year-on-year due to social unrest, ultimately leading to an overall growth of only 1.9 percent for the year.
For 2025, the IMF anticipates a recovery in growth to 3.0 percent, contingent upon the normalization of social conditions and a resurgence in economic activities, particularly within the service sector. However, preliminary figures indicated notable fiscal slippages in 2024, attributable to the economic slowdown, necessitating fiscal consolidation measures in 2025 to ensure sustainability and macroeconomic stability.
Challenges arose as wage bill spending exceeded budget forecasts, diverting funds from vital areas such as social transfers and infrastructure projects. Key recommendations included rationalizing wage bill expenses, minimizing tax exemptions, prioritizing social expenditures, and bolstering debt management to avert arrears.
Although inflationary pressures have increased, they remain manageable, with the Bank of Mozambique implementing a policy rate reduction of 500 basis points to 12.25 percent and lowering reserve requirements for local currency deposits from 39 to 29 percent in late January 2025. Inflation has remained below the implicit 5 percent target despite rising food prices and supply-chain disruptions due to social unrest.
The IMF team engaged with various government officials, including President Daniel Chapo, Prime Minister Maria Levy, Finance Minister Carla Loveira, and Governor Rogério Zandamela, as well as representatives from civil society and the private sector. The team extended gratitude to the Mozambican authorities for their cooperation and constructive dialogue throughout the mission.
In summary, the IMF’s visit to Mozambique highlighted challenges posed by economic contractions and fiscal imbalances due to social unrest in 2024. The projected growth recovery in 2025 hinges on improved social conditions and economic activity. Key recommendations for fiscal consolidation and prioritizing essential expenditures are aimed at ensuring macroeconomic stability. Continuous collaboration between the IMF and Mozambican officials will be critical in addressing these issues effectively.
Original Source: www.miragenews.com
