The IMF team, led by Mr. Pablo Lopez Murphy, discussed Mozambique’s economic policies from February 19 to March 4, 2025. The meetings addressed the Fifth and Sixth Reviews of the Extended Credit Facility. Despite economic contraction in late 2024 due to social unrest, projections indicate a recovery for 2025. Essential reforms for fiscal sustainability and inflation control were underscored during discussions with key Mozambican officials.
The International Monetary Fund (IMF) team, led by Mr. Pablo Lopez Murphy, recently engaged in discussions with the Mozambican authorities from February 19 to March 4, 2025, focusing on policies related to the Fifth and Sixth Reviews of the Extended Credit Facility (ECF). The dialogue was productive, with plans for further discussions to occur virtually in the near future.
Mr. Lopez Murphy reported after the visit that the IMF team had constructive discussions concerning the fiscal, financial, and structural policies necessary to support the completion of the program reviews. Economic activity in Mozambique sharply contracted in the last quarter of 2024, with real GDP declining by 4.9 percent year-over-year due to social unrest, although the overall annual growth was 1.9 percent. Projected growth for 2025 is anticipated to recover to 3.0 percent as conditions improve.
The IMF highlighted significant fiscal challenges in 2024 linked to the economic slowdown, with an urgent need for fiscal consolidation to ensure debt sustainability and macroeconomic stability. Overruns in wage bill expenditure are diminishing funds needed for vital areas like social transfers and infrastructure. The report emphasized the importance of rationalizing wage bills, curtailing tax exemptions, and enhancing debt management to prevent arrears.
Although inflationary pressures have increased, the situation remains manageable. The Bank of Mozambique commenced a reduction in policy rates in January 2024, decreasing them by 500 basis points to 12.25 percent. Additionally, reserve requirements for local deposits were lowered from 39 to 29 percent in late January 2025. Despite challenges such as supply chain disruptions and rising food prices, inflation has remained below the implicit target of 5 percent.
Throughout the mission, the IMF team met with several key figures including President Daniel Chapo, Prime Minister Maria Levy, Minister of Finance Carla Loveira, and Governor of the Bank of Mozambique Rogério Zandamela, along with representatives from civil society and the private sector. The team expressed gratitude for the authorities’ cooperation and the open dialogue facilitated during their visit.
The discussions between the IMF and Mozambican authorities have highlighted the challenges facing Mozambique’s economy, particularly in the wake of social unrest. The anticipated recovery in growth for 2025 comes with necessary fiscal reforms to ensure sustainability. Attention to inflation control and the need for prioritized social spending will be crucial moving forward. Continued dialogue and cooperation between the IMF and Mozambique will be essential as they navigate these economic challenges.
Original Source: www.miragenews.com
