- IMF staff and the Mozambican authorities discussed macroeconomic challenges, the balance of payments outlook, and projected financing needs. Discussions on these topics, and possible options for Fund support, were fruitful and will continue in the coming months.
- Economic activity is gradually recovering after a sharp slowdown between October 2024 and March 2025. In the face of external and fiscal imbalances, the IMF team recommends decisive action to restore macroeconomic stability, improve the growth prospects of the economy, facilitate job creation, and reduce poverty.
- Front-loaded fiscal consolidation is warranted to restore fiscal sustainability, reduce financing needs, and put debt on a clear downward path to reduce debt vulnerabilities, while creating fiscal space to support development and protect the most vulnerable. Greater exchange rate flexibility is needed to relieve FX pressures and tackle external imbalances.
Maputo, MOZAMBIQUE: An International Monetary Fund (IMF) staff team, led by Mr. Pablo Lopez Murphy, conducted discussions from August 21-29 with the Mozambican authorities on the principal economic and financial challenges, and the policies needed to support macroeconomic stability while addressing pressing development needs and fostering job-inclusive growth.
At the end of the IMF team's visit, Mr. Lopez Murphy issued the following statement:
"The IMF staff team has held constructive discussions with the Mozambican authorities on the fiscal, financial, and structural policies needed to underpin macroeconomic and financial stability, generate jobs, and enhance medium-term growth.
"Economic activity is gradually recovering after a sharp slowdown between October 2024 and March 2025. Tax revenue increased by 2.6 percent year on year in the second quarter of 2025, rebounding from a 4.2 percent decline in the first quarter. For 2025, GDP growth is projected to reach 2.5 percent as economic activity picks up, especially in the second half of the year, driven by the recovery in the services sector.
"Inflation remains contained amid tight financial conditions. Inflation was at 4 percent year on year in July, below the implicit target of 5 percent. The Bank of Mozambique initiated a loosening cycle in January 2024, cutting the policy rate by 700 basis points so far (to 10.25 percent). The central bank also reduced reserve requirements on local currency deposits, from about 39 to 29 percent, in late January 2025, providing further support to the economy.
"The current account deficit in the first half of 2025 remained subdued at $1.3 billion, reflecting tight financial conditions and foreign exchange shortages that weigh on imports. The spread between the official and the parallel exchange rates was higher in the first half of 2025 compared to 2024.
"The fiscal deficit reached 2.4 percent of full year GDP in the first half of 2025 compared to 2.8 percent in the first half of 2024. Fiscal pressures persisted not only due to subdued tax revenues —affected by the slowdown in economic activity—but also because government expenditures continued to grow at a faster pace, further widening the gap.
"In the face of external and fiscal imbalances, the IMF team recommended that the authorities take decisive action to restore macroeconomic stability, improve the growth prospects of the economy, facilitate job creation, and reduce poverty. Front-loaded fiscal consolidation is warranted to restore fiscal sustainability, reduce financing needs, and put debt on a clear downward path to reduce debt vulnerabilities, while creating fiscal space to support development and protect the most vulnerable. Greater exchange rate flexibility is needed to relieve FX pressures and facilitate the reduction of external imbalances.
"There are emerging signs of increased interest from foreign investors across a broad range of sectors. In this context, addressing macroeconomic imbalances is essential to unlock the full potential of foreign direct investment and sustain investor confidence.
"The IMF staff team met with Minister of Finance Carla Loveira, Board Member of the Bank of Mozambique Jamal Omar, and other senior officials. The team also met with 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 will continue in the coming months."
