Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Republic of Mozambique. [1]
Mozambique continues to face a complex macroeconomic environment marked by subdued growth, fiscal and debt vulnerabilities, and declining foreign aid. At the same time, the country faces pressing development needs, capacity constraints, and frequent natural disasters. Despite some positive developments—including low inflation, adequate foreign reserves, resumption of a major LNG project, and removal from the Financial Action Task Force (FATF) grey list—the challenges remain significant.
Economic activity has been recovering gradually after the sharp contraction in late 2024 following the October 2024 elections. Inflation has remained low since December 2023. While the current account deficit narrowed in 2025, it remains significantly wider than levels consistent with economic fundamentals. Gross international reserves covered about 6.5 months of imports at end-2025. In response to FX shortages in the market, the central bank has tightened FX regulations and capital outflow controls. The exchange rate against the US dollar has remained stable since 2021.
The government is facing increasingly difficult financing conditions. With debt service delays, holdings of government debt by domestic banks—the main source of financing of large and persistent fiscal deficits—have plateaued. Net external financing has been negative. Given these tight financing conditions, the fiscal deficit is estimated to have narrowed significantly in 2025, falling to 4.5 percent of GDP from 6.2 percent in 2024, largely due to reduced spending on goods, services, and capital projects.
Current macroeconomic policy settings—notably large fiscal deficits and the need for greater exchange rate flexibility—are likely to exacerbate macroeconomic and debt vulnerabilities. Primary fiscal deficits are projected to average around 2 percent of GDP through 2029, but overall deficits are likely to widen due to rising interest payments. Economic growth outside the mining sector is expected to remain modest, at around 2 percent, reflecting weak credit growth. Inflation will likely exceed the central bank's implicit target over the medium term, driven by monetary financing of large fiscal deficits. On the upside, the LNG sector offers substantial medium-term potential, with production anticipated to start from 2030 onward. Until then, the current account deficit is projected to remain large, reflecting LNG-related imports and external debt service obligations.
Executive Board Assessment
In concluding the 2025 Article IV Consultation with the Republic of Mozambique, Executive Directors endorsed staff's appraisal as follows:
"Executive Directors agreed with the thrust of the staff appraisal. They welcomed positive developments including low inflation, adequate international reserves, the planned resumption of a major LNG project, and Mozambique's removal from the FATF grey list. However, Directors stressed substantial downside risks and vulnerabilities stemming from large internal and external imbalances, weak growth, high public debt, security challenges, institutional fragilities, and climate shocks. They underscored the urgency of formulating a comprehensive policy reform package to entrench macroeconomic stability and lay the foundation for stronger and more durable growth. A clear communication of reform objectives would be critical to secure stakeholder buy‑in and help build public trust.
"Directors emphasized the critical need for ambitious and credible fiscal consolidation to help reduce financing needs and restore debt sustainability, and to create fiscal space to finance vital social and development needs. They stressed the importance of containing the wage bill, broadening the tax base, enhancing public financial management, addressing fiscal risks from state‑owned enterprises and the pension system, and strengthening debt management and transparency, while protecting vulnerable groups.
"Directors welcomed the Bank of Mozambique's prudent monetary policy and well‑anchored inflation expectations. They considered however that room for easing tight monetary conditions is limited owing to exchange rate rigidities and the risk of aggravating foreign exchange shortages. Directors concurred that additional exchange rate flexibility would allow the economy to adjust to changing external conditions and support growth, and recommended maintaining a prudent level of foreign exchange reserves. Directors encouraged close monitoring of financial sector risks, notably arising from banks' sovereign exposures, together with continued improvements in supervision, stress testing, and resolution frameworks, and further measures to promote financial inclusion. Efforts to further bolster the central bank's governance framework remain important.
"Directors underscored the criticality of strengthening structural reform implementation, focused on strengthening governance, transparency and accountability, while fostering a more conducive environment for private sector development. They welcomed the completion of the legal framework of the Sovereign Wealth Fund, which will allow it to become fully operational. Directors also underscored that continued well‑targeted capacity development remains paramount to achieving the country's development objectives.
"It is expected that the next Article IV consultation with the Republic of Mozambique will be held on the standard 12‑month cycle."
Mozambique: Selected Economic Indicators |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
