MOZAMBIQUE ECONOMIC GROWTH REMAINS ROBUST - IMF

The International Monetary Fund (IMF) considers Mozambique’s economic performance to be robust and stronger than most other sub-Saharan African countries, according to a press release issued at the end of a visit by an IMF staff mission.The mission was in Mozambique to discuss with Mozambican officials the preparation of the fourth review of the Policy Support Instrument (PSI) approved in June 2013. A PSI is an instrument for countries that are not asking the IMF to lend them any money but are still seeking IMF endorsement for their policies (often necessary to persuade other donors or funding agencies to provide support).According to the leader of the staff team, Alex Segura-Ubiergo, “growth is expected to reach seven percent in 2015, though there are downside risks to this outlook due to declining commodity prices and the need for fiscal consolidation”.He added, “over the medium-term, Mozambique is expected to remain one of the most dynamic economies in the continent, with rates of growth that could average eight percent over the 2016-19 period”.Mozambique is preparing to begin the development of a massive natural gas processing industry in the north of the country. Although the first gas will not be produced from the Rovuma basin until 2019 at the earliest, the IMF points out that up to a hundred billion US dollars will be spent on its development which “could transform the country into the third largest liquefied natural gas (LNG) exporter in the world”.The two lead companies in the Rovuma Basin, the US company Anadarko and Italy’s ENI have not yet taken final decisions on how best to exploit the estimated 200 trillion cubic feet of gas off the coast of Cabo Delgado province. However, the IMF mission “was encouraged by positive developments in the last few months, including the approval of new legislation that could help bring the projects to a final investment decision in 2015”.However, the IMF warned “while these projects will provide large fiscal revenues in about a decade, focus on other economic sectors is also essential to make growth more inclusive and create employment opportunities”.It welcomed the fact that “the government’s new economic and social plan focuses on key priorities that could support this objective”, but noted “there is a need to build capacity to transform ambitious strategic documents into effective programmes”.Turning to current events, the mission noted that inflation remained low (1.1 per cent) last year due to “a rebound in agricultural production and the relative strength of the Metical during most of the year”.It expects inflation to increase to 5.5 per cent in 2015, which will be in line with the government’s medium term target of 5 to 6 per cent.The IMF welcomed the situation whereby “after a large fiscal expansion in 2014, which saw the overall fiscal deficit soar to over 10 per cent of GDP, the 2015 budget brings back public finances to a sustainable path”.The mission was “encouraged by the authorities’ commitment to rigorous budget execution” and urged them “to carefully prioritise spending to ensure that critical social programmes are protected. Prudent borrowing for projects that bring value-for-money is essential, as fiscal space for new debt is increasingly limited”.The IMF staff team highlighted that “the authorities are making progress on structural reform implementation, and are to be commended for becoming the first country in sub-Saharan Africa to request and publish a Fiscal Transparency Evaluation (FTE) from the IMF”.During its visit from 27 April to 8 May, the IMF team met with the Minister of Economy and Finance, Adriano Maleiane; the Governor of the Bank of Mozambique, Ernesto Gove; other senior government officials; and leading figures of the private sector, civil society, and development partners.