July 19, 2017
End-of-Mission press releases include statements of IMF staff
teams that convey preliminary findings after a visit to a country. The views
expressed in this statement are those of the IMF staff and do not necessarily
represent the views of the IMF’s Executive Board. This mission will not result
in a Board discussion.
· Performance in some sectors of the economy has
improved since the latter part of 2016.
· Growth declined to 3.8 percent in 2016 and is
now projected to edge up to 4.7 percent in 2017.
· Publication of the detailed summary of the
Kroll audit report is welcomed; more needs to be done to fill the information
gaps on the use of loan proceeds.
An
International Monetary Fund (IMF) staff team led by Michel Lazare visited
Mozambique from July 10-19, 2017 to discuss with the authorities measures
needed to follow up on the recent audit report of EMATUM, Proindicus, and MAM
public sector companies. The team also assessed recent economic developments
and discussed monetary and fiscal policies in the context of the 2018 budget.
At
the end of the visit, Mr. Lazare issued the following statement:
“Performance
in some sectors of the economy has improved since the latter part of 2016. The
decisive October 2016 monetary policy tightening helped rebalance the foreign
exchange market and resulted in the metical appreciating by about 30 percent
vis-à-vis the US dollar since end-September 2016. This monetary stance
contributed also to a decline in inflation from a year-on-year peak of 26
percent in November 2016 to about 18 percent in June, despite a large increase
in fuel prices in March. Moreover, higher international coal prices and a
marked increase in coal export volumes helped narrow the trade and current
account deficits of the balance of payments, supporting a large accumulation of
international reserves, which at end-June covered about 6 months of
non-megaproject imports. On the fiscal front, the government took important
steps by removing wheat and fuel subsidies and reinstating the old automatic
fuel price mechanism in March.
“However,
the overall outlook remains challenging. Growth declined to 3.8 percent in 2016
and is now projected to edge up to 4.7 percent in 2017, mainly on account of a
surge in coal production and exports. Inflation remains elevated but is
expected to decline further. Despite budget cuts in investment and in the
purchase of goods and services, increased spending on wages and salaries
continues to put pressure on the budget, contributing to a large accumulation
of domestic arrears. Total public debt, mostly denominated in foreign currency,
remains in distress and the government missed external debt payments.
“Macroeconomic
policy discussions centered on the urgent need to further consolidate public
finances. The team emphasized that a strong commitment to fiscal adjustment is
an essential element to ensure policy sustainability, foster a decline in
inflation and interest rates, limit further increases in public debt, while at
the same time facilitate debt restructuring. The team stressed that the 2018
budget should decisively reduce the fiscal deficit. It should focus on
eliminating tax exemptions (including for VAT), containing the expansion of the
wage bill, and prioritizing the implementation of only the most critical public
investments while avoiding the further accumulation of arrears. Protecting
critical social programs and reinforcing the social safety net should cushion
the impact of these measures on the most vulnerable segments of the population.
Urgent action is also needed to strengthen the financial position of
loss-making companies and limit the fiscal risks they represent.
“On
the monetary side, the team welcomed the recent introduction of the new
monetary policy regime centering on the use of a new policy rate (MIMO) as the
central bank’s main instrument of monetary policy. The team acknowledged the
strong commitment of the central bank to reduce inflation. To address financial
sector vulnerabilities, the team urged the central bank to remain vigilant to
risks, ensure adequate liquidity provision to the economy, and continue to step
up supervision and enforcement of prudential regulations.
“The
team welcomed the publication of the detailed summary of the Kroll audit report
by the Public Prosecutor’s Office as an important step towards greater
transparency regarding the borrowing undertaken by the Ematum, Proindicus, and
MAM public companies. However, as highlighted in a June 24 press statement 17/243, while the report
summary provides useful information on how the loans were contracted and on
assets purchased by the companies, critical information gaps remain unaddressed
regarding the use of loans proceeds. The team urged the government to take
steps to fill the information gaps and to enhance its action plan to strengthen
transparency, improve governance, and ensure accountability.
“The
team met with Prime Minister Carlos do Rosario, Minister of the Economy and
Finance Adriano Maleiane, Bank of Mozambique Governor Rogerio Zandamela, Public
Prosecutor Beatriz Buchili, senior government officials, representatives from
the Parliament, private sector, and the donor community.
“The
team thanks the authorities for their continued hospitality.”
IMF Communications Department
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