Mozambique’s macroeconomic performance remains robust - CNBC Africa

Mozambique’s macroeconomic performance remains robust

Southern Africa

by Trust Matsilele 0

Mozambique is set to become one of the World's largest producers of liquefied natural gas.

The International Monetary Fund said this robust performance was experienced despite an expansionary and higher than programmed fiscal stance and reserve money running modestly above target.

(READ MORE: Mozambique extends bidding round for new gas and oil blocks)

“Performance under the PSI-supported programme has been mixed—while all but one of the quantitative assessment criteria were met at end-June, there were some slippages during the second half of the year and some delays in implementing structural reforms,” read an IMF statement.

“The main short-term challenge is to maintain the growth momentum while preserving fiscal and debt sustainability.”

According to the fund, fiscal consolidation needs to be initiated in the 2015 budget to restore prudent fiscal management.

“While low import prices have dampened inflation, the Bank of Mozambique should stay vigilant and adhere to its medium-term inflation target,” added the fund.

The fund also added that key structural reform priorities include improving VAT and overall tax administration, continuing public financial management reforms and enhancing the business environment and financial sector development.

The IMF said completion of the contract negotiations for the production of liquefied natural gas (LNG) was a critical milestone for the launch of this project, one of the largest in sub-Saharan Africa.

(READ MORE: Mozambique’s big oil & gas boom)

“Despite the heightened risks from an uncertain global outlook, growth is expected to remain strong and be broad-based in the medium term, boosted by the natural resource boom and infrastructure investment,” said the fund.

“Fiscal adjustment over the medium term will be essential to preserve debt sustainability and macroeconomic stability.”

The fund added that with foreign aid likely to decline over the medium term, Mozambique will need to borrow in order to provide additional resources for achieving targeted improvements in physical infrastructure and human capital.

“To ensure the efficiency of investment and borrowing, it is essential to further strengthen investment planning and implementation, as well as debt management.”

The IMF said structural reforms focusing on public financial management, monetary policy tools, banking supervision, and business facilitation should be implemented vigorously to sustain growth and render it more inclusive.