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2019-04-05 09:35:00

MOZAMBIQUE'S GDP UP 3.25%

MOZAMBIQUE'S GDP UP 3.25%

IMF - IMF Staff Completes 2019 Article IV Consultation Mission to Mozambique

  • While it is still early to precisely assess the macroeconomic effects of Cyclone Idai and reconstruction costs, these will be very significant.
  • Despite the likely adverse macroeconomic effects of Cyclone Idai in 2019, which are still being analyzed, the outlook is for a recovery in economic activity over the medium-term.
  • The mission also emphasizes the importance of achieving significant debt relief and strengthening oversight of the entire public debt portfolio to bring public debt indicators to safer levels.

An International Monetary Fund (IMF) staff team led by Ricardo Velloso visited Maputo during March 13–27, 2019, to conduct the Article IV consultation mission. At the end of the visit, Mr. Velloso issued the following statement:

"The mission would like to express solidarity with the Mozambican people in the aftermath of Cyclone Idai that hit hard central Mozambique, causing significant loss of life and damage. Our condolences go to those affected by this unprecedented natural disaster and their families and friends.

"While it is still early to precisely assess the macroeconomic effects of Cyclone Idai and reconstruction costs, these will be very significant. The international community will have to continue playing a vital role in assisting Mozambique. In this context, the IMF will consider the authorities' request for emergency financial assistance under the IMF Rapid Credit Facility (RCF).

"Real GDP growth decelerated to 3¼ percent in 2018, but it was broader based, with non-mining growth accelerating to 2¾ percent in 2018, from 2 percent in 2017. Inflation remains subdued, reflecting tight monetary policy, and exchange rate and food price stability. International reserves at the Bank of Mozambique are relatively comfortable, covering over six months of next year's non-megaproject imports.

"Despite the likely adverse macroeconomic effects of Cyclone Idai in 2019, which are still being analyzed, the outlook is for a recovery in economic activity over the medium-term, with more significant expansion with the start of LNG production expected in 2023.

"The fiscal policy effort was significant in 2017-18. Subsidies on fuel and wheat prices were eliminated, an automatic fuel price adjustment mechanism was adopted, and electricity and public transportation tariffs were adjusted, bringing those prices close to cost recovery levels. Despite these efforts, the overall fiscal deficit in 2018 remained relatively high.

"Medium-term fiscal consolidation will be essential to ensure that public debt-to-GDP ratios remain on a clear downward path and, given that public debt is in distress, budget financing should rely to the maximum extent possible on grants and highly concessional loans.

"The mission also emphasizes the importance of achieving significant debt relief and strengthening oversight of the entire public debt portfolio to bring public debt indicators to safer levels.

"The mission welcomes the implementation of the strategy to clear the stock of domestic payments arrears to suppliers and advises the authorities to avoid new arrears by strengthening commitment controls. It also encourages the authorities to develop a strategy to clear the backlog of VAT refunds.

"The mission welcomes cabinet approval of the SOE Law regulations and recommends strengthening controls over SOE debt issuance. The new agency envisaged in the SOE Law, once created, should exert strong financial oversight over the entire sector. However, in this area, time is of essence. The authorities should speed up the preparation and implementation of recovery, restructuring and/or privatization plans of SOEs in distress to limit risks to the budget.

"While the mission supports the drive for fiscal decentralization, it recommends a gradual transfer of revenue and spending responsibilities to subnational levels of government in line with their capacity to maintain the quality of delivery of public goods and services. It also stresses the importance of implementing fiscal decentralization without increasing overall fiscal deficits given the challenges posed by the elevated level of public debt.

"On the monetary front, the mission encourages the Bank of Mozambique to continue reducing the policy rate, albeit cautiously, while ensuring that inflation expectations remain well anchored. Lower real interest rates would help increase bank credit flows to the private sector, particularly SMEs, fostering economic activity and job creation, as well as financial inclusion. It recommends maintaining exchange rate flexibility as a shock absorber and preserving an adequate level of international reserves. The mission welcomes the Bank of Mozambique resolve to enhance supervision, enforce prudential requirements, and upgrade the regulatory framework to ensure financial stability.

"The mission encourages the authorities to continue taking steps to strengthen governance, transparency and accountability. It welcomes their ongoing efforts, with IMF technical assistance, to prepare a diagnostic report of governance and corruption challenges in areas most relevant for economic activity. The mission strongly recommends publication of this diagnostic report shortly after completion.

"To accelerate inclusive and private sector led growth, the mission recommends removing impediments to private sector investments and employment, adopting reforms to improve the business climate, and strengthening social safety nets.

"We would like to thank the authorities for fruitful discussions and warm hospitality and for the arrangements made to facilitate the mission's work. The Executive Board meeting on Mozambique's 2019 Article IV Consultation is tentatively scheduled for end-May."

The mission met with President Felipe Nyusi, Prime Minister Carlos do Rosario, Minister of Economy and Finance Adriano Maleiane, Minister of Industry and Trade Ragendra de Sousa, Minister of Mineral Resources and Energy Max Tonela, Minister of Justice Joaquim Veríssimo, Minister of Education and Human Development Conceita Sortane, Minister of Gender, Children and Social Action Cidália Chaúque, Minister of Public Works, Housing and Water Resources João Machatine, Bank of Mozambique Governor Rogério Zandamela and other senior officials of the executive branch. The mission also met with members of the Assembly of the Republic, representatives of the financial and nonfinancial private sector, civil society, labor and trade unions, and the diplomatic and IFI community.

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Earlier:  

MOZAMBIQUE LNG FOR CHINA
2019, February, 6, 10:30:00

MOZAMBIQUE LNG FOR CHINA

PLATTS - US-based Anadarko Petroleum has agreed to sell 1.5 million mt/year of LNG from its planned 12.9 million mt/year Mozambique LNG project to China's CNOOC for a period of 13 years.

 
 EXXON AND ROSNEFT IN MOZAMBIQUE
2018, October, 10, 07:40:00

EXXON AND ROSNEFT IN MOZAMBIQUE

REUTERS - The Mozambican government said on Monday it had signed oil exploration agreements with U.S. energy firm Exxon Mobil and Russia’s Rosneft.

 
 MOZAMBIQUE'S GDP UP TO  3.75%
2018, August, 6, 13:00:00

MOZAMBIQUE'S GDP UP TO 3.75%

IMF - The Mozambican economy is recovering gradually. Real GDP growth reached 3¾ percent in 2017—¾ percentage point higher than projected by Fund staff in the last Article IV consultation—supported by a stronger-than-expected recovery in agriculture and significantly higher mining production.

 
 MOZAMBIQUE'S LNG DEVELOPMENT
2018, June, 29, 10:35:00

MOZAMBIQUE'S LNG DEVELOPMENT

FT - Anadarko has estimated the reserves in its Area 1 acreage off the coast of Mozambique at about 75tn cubic feet, implying a resource life of about 120 years at the initial production rate of 12.88m tonnes of LNG per year, but the consortium intends to expand the plant every five years to add more capacity.

 
 EXXON BOUGHT MOZAMBIQUE
2017, December, 18, 12:10:00

EXXON BOUGHT MOZAMBIQUE

ExxonMobil Development Africa B.V. has acquired a 25 percent indirect interest in Mozambique’s gas-rich Area 4 block from Eni and assume responsibility for midstream operations.

 
 MOZAMBIQUE'S HUGE GAS
2016, August, 1, 18:50:00

MOZAMBIQUE'S HUGE GAS

Mozambique made one of the world's biggest gas finds in a decade in 2010 but negotiations with operators Eni and U.S. firm Anadarko have dragged on for years due to disputes over terms and concerns about falling energy prices.

 
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2016, May, 24, 19:30:00

CHINA - MOZAMBIQUE COOPERATION

CNPC and Mozambique’s national oil and gas company ENH have signed a cooperation framework agreement under which the two sides will reinforce cooperation in oil and gas exploration and production, and natural gas processing and marketing.

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