The International Monetary Fund (IMF) has approved the third assessment of Mozambique's assistance plan, which allows for the immediate disbursement of a new tranche of 60.7 million dollars for budget support.

"The Executive Board has completed the third review of the implementation of the 36-month Extended Credit Facility (ECF) program in Mozambique. With this third tranche, total disbursements to Mozambique under this ECF amount to about 273 million dollars," says a note released this Monday by the IMF.

Quoted by Negócios newspaper, the IMF points out that "the performance of the program agreed with Mozambique has been satisfactory", stressing that five of the eight structural benchmarks were met at the end of December 2023, and three of the four quantitative performance criteria were met.

In addition, that body considers that on the basis of the corrective measures adopted by the authorities, the executive council approved a waiver of the non-observance of the continuous performance criterion on the non-accumulation of new arrears of public and publicly guaranteed external payments, which were not met due to delays in the repayment of debt service.

The ECF program was approved in May 2022 and provides total funding of 456 million dollars to Mozambique.

"Economic recovery is accelerating, supported by liquefied natural gas (LNG) projects in a context of modest non-mining growth. At the same time, inflationary pressures have declined markedly. While the outlook remains positive, significant risks remain, mainly due to adverse weather events and the fragile security situation," warns the Fund's deputy managing director, Bo Li, quoted in the IMF press release.

This technical assistance program with a financial envelope "aims to support Mozambique's economic recovery and reduce public debt and financing vulnerabilities, while promoting higher and more inclusive growth through structural reforms".

In the same note, the IMF's deputy managing director acknowledged that the Mozambican authorities "are taking steps to ensure fiscal discipline in the short and medium term", but that "given Mozambique's high debt and tight financing conditions, continued fiscal consolidation efforts are needed".

"On the revenue side, broadening the VAT base will help mobilize revenue efficiently. On the expenditure side, continuing to reform the wage bill will help create fiscal space for high-priority spending, including social spending," Bo Li points out.

However, he believes that the monetary policy stance has helped to contain inflationary pressures and rebuild foreign exchange reserves and that, with inflation expectations well anchored, a gradual easing of the restrictive policy is justified.