An International Monetary Fund (IMF) team concluded a visit to Mozambique where it discussed policies underpinning the Fifth and Sixth Reviews of the Extended Credit Facility (ECF), citing significant fiscal slippages and the impact of social unrest on economic activity.
The IMF staff and Mozambican authorities held discussions which were fruitful and will continue virtually in the coming weeks, according to a statement issued by Pablo Lopez Murphy, who led the IMF team, on March 5. The team conducted discussions from Feb. 19 to March 4.
“The IMF team has held constructive discussions with the Mozambican authorities on the fiscal, financial, and structural policies needed to support the completion of the Fifth and Sixth Reviews of the ECF arrangement,” Lopez Murphy said in the statement.
Economic activity contracted sharply in the last quarter of 2024, reflecting the impact of social unrest, with real GDP declining -4.9% year-on-year in 2024Q4 from growth of 3.7% year-on-year in 2024Q3. Overall growth in 2024 was 1.9%. The IMF projects growth to recover to 3.0% in 2025 as social conditions normalise and economic activity picks up, especially in services.
Preliminary estimates suggest there were significant fiscal slippages in 2024, partly explained by the slowdown in economic activity during the last quarter. Lopez Murphy said fiscal consolidation in 2025 is necessary to secure fiscal and debt sustainability and preserve macroeconomic stability. He noted that wage bill spending overruns continue crowding out important spending priorities including social transfers and infrastructure.
“Rationalizing wage bill spending and reducing tax exemptions should underpin fiscal consolidation, social spending should be prioritized, and debt management could be further strengthened to avoid arrears,” Lopez Murphy said.
Inflation pressures picked up but remain controlled. The Bank of Mozambique initiated a loosening cycle in January 2024, cutting the policy rate by 500bps so far (to 12.25%). The central bank also reduced reserve requirements on local currency deposits, from about 39 to 29 percent, in late January 2025. Despite supply-chain disruptions and higher food prices related to social unrest, inflation remained below the implicit target of 5 percent.
During its visit, the IMF staff team met with President Daniel Chapo, Prime Minister Maria Levy, Minister of Finance Carla Loveira, Governor of the Bank of Mozambique Rogério Zandamela, and other senior officials, as well as representatives of civil society, political parties, development partners, and the private sector.
“The team wishes to thank the Mozambican authorities for their excellent cooperation and for the frank and constructive dialogue during the mission. Discussions related to the program reviews will continue in the coming weeks,” Lopez Murphy said.
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.
