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Mozambique economy grows despite Renamo threats-IMF

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Although still regarded as poor, Mozambique does not rely on IMF financial support.Despite threat of Renamo starting civil war, IMF believes economy will be resilient enough for growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

Maputo,Mozambique

Summary by Kelvin Mupungu

The Executive Board of the International Monetary Fund (IMF) has completed the first review under the three-year Policy Support Instrument (PSI) for the Republic of Mozambique

The Review concluded as follows:

  • Mozambique’s macroeconomic performance remains strong with real GDP growth for 2013 estimated at 7.1%
  • Inflation remains moderate.
  • Please note that Tradingeconomics.com reports that inflation rate in Mozambique was recorded at 3.54 percent in December of 2013. Inflation Rate in Mozambique is reported by the Instituto Nacional De Estatistica, Mozambique. Inflation Rate in Mozambique averaged 7.15 Percent from 2009 until 2013, reaching an all time high of 17.44 Percent in December of 2010 and a record low of 1.05 Percent in November of 2009. In Mozambique, the inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods.(IMF review did not indicate current rate of inflation for Mozambique)
  • The PSI-supported program is broadly on track.
  • All assessment criteria were met and most indicative targets,
  • IMF concerned about slippage on structural reforms.
  • Despite threat of resurgence of civil strife , economic outlook remains favorable
  • Growth is expected to be sustained in the medium term by the natural resource boom and infrastructure investment.
  • A recent government guarantee for large-scale borrowing by a public enterprise has raised transparency and prioritization issues that point to the need to strengthen investment and macro-economic planning.

Mozambique Economic Plan

Maputo’s economic program for 2014 emphasizes preserving macroeconomic stability and debt sustainability while promoting social development.

Real growth is projected at 8.3 percent. While recent monetary policy action has been expansionary, a more prudent approach in 2014, together with the favorable outlook for international prices could facilitate the achievement of the medium-term inflation target.

The 2014 budget envisages a significant expansion in infrastructure spending that could support growth. It also includes a sizeable pick-up in goods and services outlays, financed in part by non concessional external borrowing.

Structural reforms along a broad policy spectrum should be implemented vigorously to foster sustained and more inclusive growth.

With foreign aid likely to decline over the medium term, increased non concessional borrowing can provide additional resources for improving physical infrastructure and human capital.

Afonso Dhlakama 1de2 0306

Afonso Dhlakama has expressed frustration at being marginalised by FRELIMO.Several attacks have been carried out by both sides but indications of an all out civil war have faded. The 1992 peace agreement still is holding vaguely(Photo credit: @ Verdade)

Further strengthening debt management and investment planning and implementation are essential to ensure value-for-money, maximize the efficiency of investment and preserve debt sustainability. Completion of the new mining and hydrocarbon legislation, the related fiscal regimes, and implementation regulations would facilitate the economic development of Mozambique’s natural resources.

What is Policy Support Instrument (PSI)

  • PSIs is designed for low-income countries that may not need IMF financial assistance.
  • Mozambique still seeks close cooperation with the IMF in preparation and endorsement of their economic policy frameworks.
  • PSI-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners.
  • A country’s performance under a PSI is reviewed bi-annually.

-IMF

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