IMF Country Report Moz

IMF Country Report No.
23/255
REPUBLIC OF MOZAMBIQUE
SECOND REVIEW UNDER THE THREE-YEAR
July 2023 ARRANGEMENT UNDER THE EXTENDED CREDIT
FACILITY, REQUESTS FOR MODIFICATION OF THE
MONETARY POLICY CONSULTATION CLAUSE,
WAIVERS OF NONOBSERVANCE FOR QUANTITATIVE
PERFORMANCE CRITERIA, AND FINANCING
ASSURANCES REVIEW—PRESS RELEASE; STAFF
REPORT; AND STATEMENT BY THE EXECUTIVE
DIRECTOR FOR THE REPUBLIC OF MOZAMBIQUE
In the context of the Second Review Under the Three-Year Arrangement Under the
Extended Credit Facility, Requests for Modification of The Monetary Policy Consultation
Clause, Waivers of Nonobservance for Quantitative Performance Criteria, and Financing
Assurances Review, the following documents have been released and are included in this
package:
• A Press Release including a statement by the Chair of the Executive Board.
• The Staff Report prepared by a staff team of the IMF for the Executive Board’s
consideration on July 6, 2023, following discussions that ended on May 5, 2023, with
the officials of the Republic of Mozambique on economic developments and policies
underpinning the IMF arrangement under the Extended Credit Facility. Based on
information available at the time of these discussions, the staff report was completed
on June 21, 2023.
• A Debt Sustainability Analysis prepared by the staff of the IMF and the World Bank.
• A Staff Supplement updating information on recent developments.
• A Statement by the Executive Director for the Republic of Mozambique
The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and
other documents.
Copies of this report are available to the public from

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© 2023 International Monetary Fund
©International Monetary Fund. Not for Redistribution
PR23/258
IMF Executive Board Completes the Second Review under the

Extended Credit Facility Arrangement for the Republic of
Mozambique
FOR IMMEDIATE RELEASE
• The IMF Executive Board completed the second review under the Extended Credit Facility
(ECF) Arrangement for Mozambique, providing the country with access to SDR 45.44
million (about US$ 60.6 million).
• The three-year ECF arrangement aims to support Mozambique’s economic recovery,

reduce public debt and financing vulnerabilities, while fostering higher and more inclusive
growth through structural reforms.
• Based on the mixed program performance, the authorities have taken substantive actions
to resolutely address macroeconomic challenges and keep the program on track,
especially to reduce the wage bill and keep the fiscal outlook aligned with program
targets. The tight monetary policy stance is appropriate to contain inflation pressures.
Washington, DC — July 6, 2023: The Executive Board of the International Monetary Fund
(IMF) completed the Second Review under the three-year ECF arrangement for
Mozambique. 1 This allows for the immediate disbursement of SDR 45.44 million (about US$
60.6 million), usable for budget support, bringing Mozambique’s total disbursements under the
ECF arrangement to SDR 159.04 million (about US$ 212.09 million).
By completing the review, the Executive Board approved waivers of nonobservance for two
performance criteria: (i) the end-December 2022 performance criterion on domestic primary
budget balance was missed due to overruns in the implementation of the wage bill reform and
revenue shortfalls; (ii) the continuous performance criterion on non-accumulation of public and
publicly-guaranteed external arrears was missed due to delays in debt service repayment by a
SOE. Both waivers of nonobservance were approved based on remedial actions taken by the
authorities.
The monetary policy consultation clause (MPCC) band was breached at the lower bound, as
inflation decelerated faster than expected. The monetary policy consultation with the
Executive Board was completed. The Executive Board also completed the financing
assurances review and approved the authorities’ request for modification of conditionality. 2
Growth is projected to increase in 2023, driven by increasing liquefied natural gas (LNG)
production, agriculture, and services activities. Inflation has returned to single digits, due to
proactive monetary policy and favorable import prices for fuel and food. Fiscal performance in
2022 was worse than expected, mainly due to slippage in the wage bill reform and revenue
1 Arrangements under the ECF provide financial assistance that is more flexible and better tailored to the diverse needs of low-income
countries (LICs), including in times of crisis (e.g., protracted balance of payments problems).
2 The 36-month ECF arrangements was approved in May 2022 (Press Release).

underperformance. While LNG investments are driving the current account deficit, the
expected increase in LNG exports, and the moderation of food and energy imports, is
projected to improve the current account balance going forward. Program performance has
been broadly favorable, though with notable slippages in the fiscal area, while important
program commitments in the areas of fiscal governance and anti-corruption were completed.
Risks to the outlook are primarily on the downside. Delays to LNG projects and deepening
geo-economic fragmentation present risks, while inflation remains vulnerable to pressures
from higher wages. Natural disasters and food insecurity also represent downside risks.
Upside risks include ramping up of LNG projects.
Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director and Acting
Chair, made the following statement:
“Economic recovery in Mozambique is strengthening, supported by the liquified natural gas

(LNG) projects and rebound in various sectors. The economy has shown resilience to Cyclone
Freddy which hit Mozambique in early 2023. While the outlook remains positive, significant
risks remain, mainly due to adverse climate events and a fragile security situation.
The authorities are undertaking corrective measures to ensure fiscal discipline in 2023 and
continued fiscal consolidation efforts are also warranted over the medium term. On the
revenue side, broadening the VAT base will help mobilize revenues in an efficient way. On the
expenditure side, reducing the wage bill in line with regional peers will help create fiscal space
for high-priority spending. Further strengthening the social safety net remains important to
address food insecurity and elevated poverty.
The monetary policy stance is appropriate to help contain inflationary pressures and rebuild
reserves. While inflation has decelerated faster than expected, continued caution is warranted
to help anchor inflationary pressures and support macroeconomic stability. Implementing an
appropriate and carefully calibrated policy mix between fiscal and monetary is key. Improving
the transmission of the policy rate by implementing an inflation targeting regime over the
medium term remains important for improved macroeconomic management, and to allow
greater exchange rate flexibility to cope with external shocks.
Continued progress is also needed across the governance, anti-corruption, and fiscal
structural agenda, including submitting to Parliament the Sovereign Wealth Fund law which
aims to develop a transparent, accountable, and efficient framework for managing LNG
receipts. Other key reforms include improvements in revenue administration, public financial
and debt management and in State Owned Enterprise (SOE) transparency. Strengthening the
AML/CFT framework and monitoring vulnerabilities in the financial sector, including
cybersecurity risks, also remain important. Given Mozambique’s strong vulnerabilities to
climate change, there is also a need for policies to enhance climate resilience.
Continued program ownership by the authorities complemented with capacity development

efforts and donor support also remain essential for Mozambique to achieve its development
objectives.”

Table 1. Mozambique: Selected Economic Indicators, 2019–23
2019 2020 2021 2022 2023

National Income and Prices
Nominal GDP (MT billion) 963 983 1,053 1,223 1,414
Real GDP growth (percentage change) 2.3 -1.2 2.4 4.2 7.0
Consumer price index (percentage change, 3.5 3.5 6.7 10.3 6.7
end of period)
Government Operations (percent of GDP)
Total revenue 29.0 23.9 25.3 23.4 23.5
Total expenditure and net lending 28.2 32.9 30.9 32.3 30.2
Overall balance, after grants 0.3 -5.7 -4.7 -4.9 -2.8
Primary Balance after grants 3.5 -2.6 -2.0 -2.0 0.4
Public sector debt 99.0 120.0 104.9 95.5 89.7
of which: external 79.4 97.8 81.2 71.1 65.6
Money and Credit
Reserve money (percentage change) 19.1 9.0 -14.3 0.6 85.9
M3 (Broad Money) (percentage change) 13.4 23.3 1.9 8.7 5.2
Credit to the economy (percentage change) 4.2 13.1 5.2 4.0 6.0
Credit to the economy (percent of GDP) 23.8 26.4 25.9 23.2 21.2
External Sector (percentage change)
Merchandise exports -10.2 -23.1 55.6 47.2 -1.9
Merchandise exports, excluding
8.3 -22.0 43.0 31.9 8.8
megaprojects
Merchandise imports 9.5 -12.9 33.2 70.2 -29.5
Merchandise imports, excluding
9.3 -4.5 37.8 12.1 7.9
megaprojects
External current account, after grants
-19.1 -27.6 -22.4 -32.9 -15.5
(percent of GDP)
Net international reserves (millions of U.S.
3,605 3,493 2,927 2,333 …
dollars, end of period)
Gross international reserves (millions of U.S.
3,884 4,070 3,470 2,888 …
dollars, end of period)
Sources: Mozambican authorities; and IMF staff estimates and projections.

SECOND REVIEW UNDER THE THREE-YEAR ARRANGEMENT
June 21, 2023
UNDER THE EXTENDED CREDIT FACILITY, REQUESTS FOR
MODIFICATION OF THE MONETARY POLICY CONSULTATION
CLAUSE, WAIVERS OF NONOBSERVANCE FOR QUANTITATIVE
PERFORMANCE CRITERIA, AND FINANCING ASSURANCES
REVIEW
EXECUTIVE SUMMARY
Context. The economic recovery is broad-based and strengthening. Inflation pressures remain
moderate reflecting favorable domestic food production and stable fuel prices. Fiscal
performance in 2022 was worse than expected, mainly due to slippage in the wage bill reform
and revenue underperformance. Mozambique has been grappling with the impact of Cyclone
Freddy and a persistent cholera outbreak. The security situation in the North has improved;
municipal elections will be held in October 2023, and general elections in October 2024.
Outlook and risks. Macroeconomic prospects remain positive, and growth is projected to rise
to 7 percent in 2023, driven by LNG production. Delays to LNG projects and deepening geo-
economic fragmentation present risks, while inflation remains vulnerable to pressures from
higher wages. General elections might impact the authorities’ reform commitment. Security
risks and population displacement remain critical challenges. Natural disasters and food
insecurity also represented downside risks. Upside risks include ramping up of LNG projects.
Program performance. Performance criteria (PC) on net international reserves and new non-
concessional external debt were met, while PCs on the domestic primary balance and external
arrears were missed. The monetary policy consultation clause band was breached at the lower
end, as inflation decelerated faster than expected. The indicative target on contracting of new
external debt was met, but the ceiling on the domestic debt stock was breached and the floor
on social spending was not met. Four out of five structural benchmarks were met.
Keeping the program on track. The authorities have taken substantive actions to resolutely
address macroeconomic challenges and keep the program on track. In the fiscal area, they
quickly adopted measures to reduce the wage bill and keep the fiscal outlook aligned with
program targets. In the monetary area, the central bank has taken appropriate action to contain
inflationary pressure and reduce drains on FX reserves. Looking ahead, modifications to some
performance criteria for the third review are being proposed (a small reduction in the NIR target
and the indicative target on the stock of domestic debt), and important structural reforms will
be implemented, including with respect to revenue mobilization, the wage bill and governance.
A sovereign wealth fund law expected to be approved by Parliament in July will help properly
manage significant expected revenue from LNG over the medium term.

Approved By An IMF team comprising Pablo Lopez Murphy (head), Mai Farid,
Andrea Richter Hume Samuel Mann, Dominique Simard (all AFR), and Gaëlle Pierre (SPR)
(AFR) and Boileau held discussions with the Mozambican authorities during a mission
Loko (SPR) to Maputo April 24-May 5, 2023. The mission met with the
Honorable Mr. Adriano Maleiane, Prime Minister, the Honorable
Mr. Ernesto Max Tonela, Minister of Economy and Finance; Bank of
Mozambique Governor Rogério Zandamela; senior officials,
members of parliament and private sector representatives. The
team was assisted in Maputo by Alexis Meyer Cirkel, resident
representative; Esther Palacio, TA coordinator; Vanda Castelo and
Edson Manguinhane, local economists; and Béatrice Rangel,
assistant. Adriano Ubisse (Alternate Executive Director-OEDAE)
participated in some meetings and Jorge Essuvi (Senior Advisor,
OEDAE) participated in all meetings. Jimena Montoya and Hatem
Alsokhebr (AFR) contributed to the preparation of this report.
CONTENTS
CONTEXT_________________________________________________________________________________________ 4
PROGRAM PERFORMANCE _____________________________________________________________________ 4
RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK ________________________________________ 5
POLICY DISCUSSIONS ___________________________________________________________________________ 7

A. Fiscal Policy ____________________________________________________________________________________ 8
B. Reducing Debt Vulnerabilities and Preparing for LNG Revenues _______________________________ 9
C. Monetary and Exchange Rate Policy __________________________________________________________ 11
D. Financial Stability and Financial Inclusion _____________________________________________________ 12
E. Structural Reforms_____________________________________________________________________________ 12
PROGRAM MODALITIES AND OTHER ISSUES ________________________________________________ 13
STAFF APPRAISAL _____________________________________________________________________________ 16
FIGURES
1. Growth and Living Standards __________________________________________________________________ 18
2. COVID-19 Pandemic, Growth, and Inflation ___________________________________________________ 19
3. Monetary and Financial Developments ________________________________________________________ 20
4. Selected External Sector Developments _______________________________________________________ 21
5. Fiscal Developments___________________________________________________________________________ 22
2 INTERNATIONAL MONETARY FUND

TABLES
1. Selected Economic and Financial Indicators, 2020–28 _________________________________________ 23
2a. Government Finances, 2019–28 (Billions of Meticais)_________________________________________ 24
2b. Government Finances, 2019–28 (Percent of GDP) ____________________________________________ 25
2c. Government Finances, 2019–28 (Percent of non-LNG GDP) __________________________________ 26
3. Monetary Survey, 2020–28 ____________________________________________________________________ 27
4a. Balance of Payments, 2019–28 (Millions of U.S. dollars) ______________________________________ 28
4b. Balance of Payments, 2019–28 (Percent of GDP) _____________________________________________ 29
5. External Financing Needs and Sources, 2021–28 ______________________________________________ 30
6. Financial Soundness Indicators for Banking Sector, 2019–23 __________________________________ 31
7. Risk Assessment Matrix________________________________________________________________________ 32
8. Indicators of Capacity to Repay the Fund _____________________________________________________ 34
9. Schedule of Disbursements Under the ECF Arrangement, 2022–25____________________________ 35
10. Composition of Public Debt and Debt Service by Creditor, 2022–24 _________________________ 36
ANNEXES
I. Country Engagement Strategy _________________________________________________________________ 37
II. Consultation with the IMF Executive Board on the Missed Inflation Target under the MPCC __ 41
III. External Sector Assessment ___________________________________________________________________ 43
APPENDICES
I. Letter of Intent _________________________________________________________________________________ 47
Attachment I. Memorandum of Economic and Financial Policies _______________________ 50
Attachment II. Technical Memorandum of Understanding ______________________________ 73
INTERNATIONAL MONETARY FUND 3

CONTEXT
1. Mozambique has been grappling with the impact of Cyclone Freddy and persistent
cholera. Cyclone Freddy hit Mozambique in March 2023 and destroyed over 130,000 homes, left
more than 640,000 people homeless, and damaged 1,000 schools, roads, and 390,000 hectares of
land. It also exacerbated a cholera outbreak that, according to the UN, has affected over 27,000
people. The World Bank has provided assistance of $150 million to repair the transportation
infrastructure and support the provision of services in the areas of health, education, energy,
water, and sanitation.
2. General elections are scheduled for October 2024, against a backdrop of an

improving security situation in the North. Elections in the 65 municipalities in October 2023
will inform the outlook for the general elections the following year. On the security front,
Mozambique has been dealing with an insurgency since 2017 in the northern state of Cabo
Delgado, where the LNG infrastructure is located. In recent months, the displaced population has
been returning to the region, including to the districts hosting the large LNG investment projects.
TotalEnergies, the largest consortium partner, had suspended operations in March 2021 but is
currently assessing security conditions to decide when activities can be resumed. Mozambique is
classified by the World Bank as a fragile and conflict-affected state, on account of its legacy of
armed conflict and high vulnerability to extreme weather conditions (Annex I).
PROGRAM PERFORMANCE
3. Program performance has been broadly favorable, though with notable slippages
in the fiscal area:
• The end-December 2022 PC on net international reserves, the PC on non-concessional

external debt, and the indicative target (IT) on new external debt were met. However, the
PC on the domestic primary balance and the IT on domestic debt were missed by wide
margins and the IT on social spending was not met by a small margin (Text Table 1). In
addition, the continuous PC on non-accumulation of external arrears was temporarily
breached.
• Four structural benchmarks (SBs) were met: submitting the Sovereign Wealth Fund bill to
Parliament; establishing a quarterly Treasury budget; implementing e-SISTAFE tools for
budgetary planning in all spending units; and adopting the attrition rules for civil
servants. The elimination of VAT exemptions by end-2022 was not met as some
exemptions were extended until end-2023.
4. Inflation was lower than anticipated and breached the lower bound of the
Monetary Policy Consultation Clause (MPCC) in December 2022. At 10.3 percent (y/y),
inflation was below the 12 precent lower bound of the MPCC (Annex II). Favorable domestic food
production during the last quarter combined with lower imported food prices helped contained

inflationary pressures. Moreover, pump prices for fuel were constant throughout the second half
of 2022 due to the suspension of the automatic fuel price adjustment mechanism, leading to
lower-than-expected transport prices, and lower second-round effects (see ¶12, Figure 3).
Text Table 1. Quantitative Performance Criteria (QPC) and Indicative Targets (IT) for End-
December 2022 Under the ECF Arrangement
(In billions of meticais, unless otherwise indicated)
PC/IT
PC/IT Actual Status
Adjusted
Performance Criteria
Floor on domestic primary budget balance 2.7 -30.6 not met
Ceiling on new non-concessional external debt contracted or guaranteed by the public sector (US$ million)
0 0 met
1/
Floor on the stock of net international reserves of the BM (US$ millions) 2,000 1,976 2,251 met
Ceiling on the accumulation of new public and publicly-guaranteed external payment arrears. (US$ million) 0 1 not met
MPCC
Inflation (upper-band, percent) 18.0
Inflation (mid-point, percent) 15.0 10.3 not met
Inflation (lower-band, percent) 12.0
Indicative Targets IT
Present value of new external debt (US$ million) 294 93.5 met
Ceiling on domestic debt stock 270 271.4 281.5 not met
Floor on social spending 5.8 5.7 not met
Sources: Mozambican authorities; and IMF Staff.
1/ Please refer to the Technical Memorandum of Understanding (TMU) (Attachment II, section b) for details on the adjustor to
the NIR floor.
RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK

5. The economy continues recovering and the growth outlook is favorable. Sectors
most impacted by COVID-19 (hospitality, transport, and communications) rebounded in 2022,
while agriculture benefited from favorable
rainfalls (Text Figure 1). Growth in 2022 is Text Figure 1. GDP Growth
estimated at 4.2 percent, 1 and is projected (In Percent year-on-year)
to rise to 7 percent in 2023, driven by the
offshore LNG platform that started
operations in October 2022. Staff forecast
two further LNG projects to start
production in 2027 and 2029 with positive
impact on growth, fiscal revenues, and the
current account (Figure 2). Non-LNG
growth is forecast to remain broadly
unchanged in 2023, close to the estimated
potential for non-LNG growth of 4 percent.
Inflation is expected to continue
Sources: Authorities’ data and IMF Staff calculations
moderating towards 6.7 percent (y/y) at
end-2023, reflecting tight monetary policy conditions. The policy rate has been at 17.25 percent
1
On 23 May 2023, INE published a first estimate for 2022 nominal GDP growth at 16.1 percent, significantly
higher than previously forecast.

since September 2022, and the required reserve ratio on local (foreign) currency deposits was
raised from 10.5 (11.5) percent to 28 (28.5) percent in February, and 39 (39.5) percent in May.
Text Figure 2. Inflation and Related Developments
Tight monetary policy has restrained core inflation… …while food and fuel have driven headline CPI.
Second-round effects have remained modest… …and headline developments are in line with the region.
Sources: Authorities’ data and IMF Staff calculations.

1/ Core inflation calculated by National Statistics Institute (INE) excludes fruit, vegetables, and products with administered prices.
6. The external position is assessed as substantially weaker than the level implied by
fundamentals and desirable policies (Annex III). The overall current account deficit widened in
2022, though less than expected as buoyant exports, especially coal, helped offset an increase in
non-megaproject imports. Over the medium term, diversification policies and inflows from LNG
receipts should help strengthen the external sector position. Gross international reserves have
declined but remain above 4.3 months of non-megaproject imports excluding indirect
megaproject-related imports (Figure 4). During 2022, international reserves declined steadily,
while the MT/dollar exchange rate remained stable. The BM’s policy to supply FX to cover fuel

import bills 2 has caused a drain on reserves, as international fuel prices increased rapidly in the
context of the invasion of Ukraine.
7. Fiscal performance in 2022 was worse than expected (Table 2). The domestic primary
balance was -2.5 percent of GDP, lower than previously projected. This was driven by overruns in
the implementation of a complex wage bill reform and by revenue shortfalls. The wage bill
reform aimed to unify salary scales and streamline supplementary pay components to put the
wage bill on a stronger footing but resulted in significant average wage increases. Low revenues
reflected lower collections on taxes on goods and services (especially VAT) and non-tax revenue.
The fiscal slippage was financed primarily through higher and costly domestic financing.
8. Risks to the outlook are primarily on the downside (Table 7). Higher frequency and
severity of natural disasters are a key risk, as is intensification of the insurgency in the North.
Delays to LNG projects, limited fiscal space for growth-enhancing outlays, and deepening geo-
economic fragmentation also present risks to growth. Inflation remains vulnerable to commodity
price shocks and potential pressures from higher wages. The authorities’ reform commitment
could come under pressure as general elections draw closer. Upside risks include ramping up
production under current LNG projects, and higher demand for LNG.
POLICY DISCUSSIONS
Aligning fiscal policy with program Text Table 2. Government Finance, 2022–23
targets to secure fiscal sustainability is (Percent of GDP)
the main near-term challenge. Monetary 2022 2022 2023 2023
policy remains appropriately focused on ECR-R1
(Proj.)
ECR-R2
(Est.)
ECR-R1
(Proj.)
ECR-R2
(Proj.)
containing imported inflationary

Total revenue 25.7 23.4 25.9 23.5
pressures and second round effects, but Tax revenue 21.8 20.0 21.8 20.1
options for looser policy should be Income and profits 10.7 10.5 10.7 10.9
Goods and services 8.2 6.8 8.2 6.6
explored once the policy mix between Nontax revenue 3.9 3.4 4.0 3.4
fiscal and monetary has been rebalanced
Total expenditure and net lending 33.2 32.3 33.3 30.2
in a sustainable manner. Structural Current spending 26.1 25.8 24.8 23.6
reforms efforts prioritize improving Wage bill 14.6 16.4 14.1 14.6
Goods and services 4.4 3.9 4.5 2.9
governance. Over the medium term, the Interest on public debt 3.5 2.9 3.2 3.2
Subsidies and transfers 3.7 2.6 3.0 2.9
program aims to reduce debt Capital Spending 6.7 6.3 8.1 6.3
vulnerabilities, rebalance fiscal and
Net lending 0.4 0.2 0.4 0.3
monetary policies, enhance governance
to promote private sector development, Primary balance (after grants) -0.2 -2.0 -0.7 0.4
Overall balance (before grants) -8.2 -8.8 -7.4 -6.7
and strengthen the policy and Overall balance (after grants) -3.7 -4.9 -3.9 -2.8
institutional frameworks for managing Domestic primary balance 0.2 -2.5 0.7 0.6
Sources: Ministry of Economy and Finance and IMF staff projections.
natural resources.
2
It also reduced its provision of FX to fuel importers from 100 percent to 60 percent of the fuel import bill in
April and ceased it completely in June

A. Fiscal Policy
9. The fiscal slippage of 2022 will be corrected in 2023. The domestic primary balance
in 2023 is projected at 0.6 percent of GDP, in line with the target set at the first ECF review, and 3
percent of GDP higher than in 2022 (Text Table 2 and Table 2b). Tax revenue is projected at
about 20 percent of GDP, about 1½ percentage points of GDP lower than projected under the
first review, with lower collection from taxes on goods and services partly offset by higher
personal income tax collection on account of a higher wage bill. VAT revenue in 2023 is
projected to be significantly lower than previously envisaged due to weak performance in 2022
and a smaller-than-expected broadening of the VAT net in 2023, as the elimination of some
exemptions was postponed to 2024. In 2024, the spillovers from stronger economic activity in
the North will underpin tax revenue. Expenditure is projected at about 30 percent of GDP, about
3 percent of GDP lower compared to the first review, driven by lower spending on goods and
services and lower capital spending, which more than compensate for the higher wage bill.
10. The authorities are adopting expenditure and revenue measures to ensure that
fiscal performance aligns with program objectives in 2023. In January, the authorities
reduced public sector salaries by
20 percent (excluding the lowest Text Table 3. Corrective Measures in 2023
four of the 21 salary scales) and (In MT billion) (In percent of GDP)
eliminated the 13th-month wage. Wage Bill Reducing Measures
In May, the Parliament amended Incorporation of all public sector servants into the electronic payroll system (prior 1.8 0.14
action)
the wage bill law to reduce the Approval by parliament of amendments to the wage bill law, adjusting the percentage of 0.5 0.04
the reference salary, which is applied to the calculation of the representation subsidy, for
salary and subsidies for statutory statutorily appointed and elected holders of public office (prior action).
appointed and elected public General audit and "proof of life" of all public sector servants, to be completed and 0.7 0.05
office holders by 5 and reported on by the Inspector-General of Finances (IGF) (proposed structural
January 2023 decrees; reducing the reference salary by 20 percent for public sector 14.3 1.1
10 percentage points, respectively servants
6.4 0.5
(prior action). In addition, the No 13th month
Revenue Measures
authorities will incorporate all Including all public sector employees under the personal income tax net (proposed 0.6 0.04
public sector servants into the structural benchmark).
electronic payroll system (prior Approval of Ministerial Regulation (Diploma) to determine the reference price of
extractive industry upon which the tax base is calculated on the basis of international
0.7 0.05
action). Further reduction of the prices instead of the current practice of using the firm's last sale price (proposed
wage bill will be achieved through Total fiscal impact of corrective measures 25.0 1.9
an audit and "proof of life" of all Sources: Ministry of Economy and Finance and IMF staff projections.
public sector servants (newly
proposed structural benchmark for September 2023). Against this backdrop, the wage bill is
projected to decline from 16.4 percent of GDP in 2022 to 14.6 percent of in 2023. 3 Spending in
goods and services is projected at 2.9 percent of GDP, in line with the ceiling in the approved
2023 budget. This is consistent with average spending over the period 2017-19, and one
percentage point below the 2022 outturn. The authorities have committed to revenue
3
Since January 2023, the authorities have started reporting the monthly wage bill to IMF staff. For the period
January-April 2023, the monthly wage bill has been stable at MT15.8 billion, which is consistent with staff
projections in 2023.

mobilization by including all public sector employees under the personal income tax net (MEFP
¶21) (Text Table 3).
11. The authorities are committed to reducing the wage bill even further over the
medium term. The goal is to increase fiscal space for important spending priorities including
human capital, safety nets, and climate resilient infrastructure. They will prepare an action plan
laying out how the wage bill will be reduced to 10 percent of GDP by 2028 to create space to
spend on infrastructure and human capital, crucial for economic growth and poverty reduction
(MEFP ¶21). The details of the action plan will be informed by forthcoming technical assistance
from FAD.4 The authorities will start monthly reporting of the wage bill to improve monitoring
under the program.
12. The authorities have reactivated the automatic fuel price mechanism, which was
suspended in July 2022 in light of high fuel import costs. Fuel prices were fixed well below
international market prices. This has led the government to incur a liability to fuel distribution
companies estimated at 2 percent of GDP. In April 2023, the government reactivated the
automatic fuel price mechanism—described in Box 1 of the Staff Report to the First Review—
which will allow for a gradual elimination of the accumulated liability to fuel distributers and yield
additional VAT revenues. The authorities plan to continue mitigating the impact of higher fuel
prices on the most vulnerable, by keeping public transportation fares (which affect the most
vulnerable disproportionately) unchanged, providing subsidies to public transportation
companies. A public transportation fund was created in May 2023, with contributions from the
fuel distribution companies, to fully finance these subsidies and avoid fiscal costs.
B. Reducing Debt Vulnerabilities and Preparing for LNG Revenues
13. Overall and external public debt are assessed at high risk of distress (DSA Annex).
Some indicators are projected above sustainability thresholds for some years under the baseline
and in some alternative scenarios. Public debt is assessed as sustainable in a forward-looking
basis because a large share of projected future borrowing reflects the state’s participation in the
large LNG projects, which will be repaid directly from future LNG revenues and are expected to
bring significant revenues. The assessment is unchanged from the DSA at program approval in
May 2022.
14. The external borrowing plan relies only on concessional loans. The World Bank
approved a $300 million credit for the “Mozambique Access to Finance and Economic
Opportunities Project” in March 2023. The authorities are considering several scenarios for
combining concessional financing for other projects, while keeping under the borrowing ceiling
agreed under the program (Text Table 4). They are notably considering loans from the OPEC
Fund, Italy, the Islamic Development Bank, and the Arab Bank Economic Development in Africa,
including to support the food production and the health sector.
4
An IMF technical assistance scoping mission took place in May 2023 to be followed by a diagnostic mission
scheduled September 2023.

15. External arrears. The authorities

Text Table 4. Projected External Borrowing
incurred small arrears on external debt
Program, January 1, 2023 to June 30, 2024
service: in late 2022 with Spain for debt
PV of New Debt 1/
service of about $1.1 million (which was PPG External Debt (Program Purposes)
left unpaid by an SOE), and with Portugal USD million Percent
for about $4.7 million, and in early 2023
with the Islamic Development Bank for By Sources of Debt Financing 691 100
Concessional debt, of which 2/ 691 100
about $0.49 million. These arrears were Multilateral debt 394 57
due to delays incurred because of Bilateral debt 297 43
Other 0 0
recurrent discrepancies between the
Non-concessional debt, of which 0 0
internally forecasted debt service and Semi-concessional 3/ 0 0
creditors’ invoices, and liquidity Commercial terms 4/ 0 0
constraints; they have since been

By Creditor Type 691 100
resolved. An agreement on resolving Multilateral 394 57
arrears owed to Brazil was reached in Bilateral - Paris Club 197 29
Bilateral - Non-Paris Club 100 14
2022; it is pending ratification by the
Other 0 0
Brazilian Parliament. Brazil has consented
to Fund financing notwithstanding these Uses of Debt Financing 691 100
Economic Development 312 45
arrears. The authorities continue to make
Infrastructure 379 55
best efforts to resolve pre-HIPC arrears Sources: Mozambican authorities and IMF staff estimates.
1/ Contracting and guaranteeing of new debt. The present value of
with five countries. They notably revised debt is calculated using the terms of individual loans and applying the
the reconciled amount with Angola, and 5 percent program discount rate.
2/ Debt with a grant element that exceeds a minimum threshold. This
reached an agreement with Libya, which minimum is typically 35 percent, but could be established at a higher
level.
however has at this point less favorable 3/ Debt with a positive grant element which does not meet the
minimum grant element.
terms than those prescribed by the HIPC 4/ Debt without a positive grant element. For commercial debt, the
process (see DSA for details). 5 present value would be defined as the nominal/face value.
16. The authorities are making progress in implementing their Medium-Term Debt
Strategy (MTDS). The strategy aims to increase the share of concessional external financing and
lengthen maturities of domestic debt. In this regard, the authorities are considering to engage
commercial banks in several reforms aimed at lowering the government’s borrowing costs. The
authorities have been benefitting from World Bank and IMF TA to develop and implement the
MTDS. IMF TA helped the authorities simulate an annual borrowing plan (ABP). A goal is to
publish timely updates of a focused MTDS and a detailed ABP, ideally before the beginning of
each year. Amid a high need to develop the primary and secondary government security
markets, the authorities have recently requested MCM TA on the development of local currency
government bond markets.
17. The Sovereign Wealth Fund bill was submitted to Parliament in December 2022
(SB); passage is expected by July 2023. In managing LNG revenue, a well-designed law is
critical to ensure short-term macroeconomic stability and long-term fiscal sustainability. The
5
Given that a representative Paris Club agreement covers the claim, this means that the pre-HIPC arrears with
Angola, Bulgaria, Iraq, Libya, and Poland are deemed away under the IMF Lending Into Official Arrears policy. The
PC Secretariat is currently reviewing the proposed agreement between Mozambique and Libya.

draft law, which was informed by the Santiago Principles, calls for LNG revenue to be divided
between the SWF (40 percent) and budget (60 percent) for the first 15 years, changing to
50 percent each thereafter. A key concern with this allocation rule was that LNG revenue
transferred to the budget could be highly volatile. To address this issue the draft law was revised
so that LNG revenue transferred to the budget is calculated based on a moving average of past
and future petroleum prices. Further implementing regulations (which are being prepared with
technical support from the IMF and from Norway) will be needed to ensure that LNG revenues
transferred to the budget are used in a transparent and effective way.
C. Monetary and Exchange Rate Policy
18. The Bank of Mozambique (BM) proactively tightened monetary policy to address
inflationary pressures in a context of high commodity prices and the recent fiscal
expansion. The outlook for global commodity prices is uncertain and there are risks that higher
wages could fuel demand for domestic goods and imports, and contribute to depreciation
pressures on the exchange rate, which would spill over to inflation. 6 In this context, the current
tight monetary policy conditions remain warranted. 7 Provided the fiscal position remains on
a strong footing, and inflationary pressures have abated, there would be scope to loosen
monetary policy and achieve a more balanced policy mix.
19. In addition to the tight monetary stance, the BM has used other levers to contain
exchange rate depreciation pressures and slow the depletion of international reserves.
It raised the reserve requirements on FX deposits from 11.5 percent to 28.5 percent in February
2023 and to 39.5 percent in May. It also reduced its provision of FX to fuel importers from
100 percent to 60 percent of the fuel import bill in April and ceased it completely in June.
20. The BM’s exchange rate management policy has resulted in a de facto fixed
exchange rate vis-à-vis the U.S. dollar since mid-2021. The BM has intervened in the FX
market mainly to supply FX to cover fuel import invoices. In addition, tight regulation and moral
suasion have increased barriers for financial intermediaries to deviate from the current exchange
rate. Coupled with a preference of importers and exporters for exchange rate stability, the
exchange rate has been de facto fixed against the USD since mid-2021. Maintaining a stable
exchange rate could help counter imported inflationary pressure and contribute to greater
economic certainty over the short run—provided that fiscal and domestic credit policies are
prudent to remain consistent with the peg.
21. The BM is building the basis for an inflation targeting framework, with IMF and
Norges Bank support. Improving the transmission of the policy rate by deepening the
interbank, money, and FX markets over the medium term remains important, as well as reducing
the reliance on the reserve requirement ratio as a policy tool. This requires further modernizing
the BM’s liquidity management and the money market, with continued TA support by MCM and
6
See Aisen et al. (2021), An Empirical Assessment of the Exchange Rate Pass-through in Mozambique, IMF Working
Paper No. 2021/132.
7
The real policy rate in April was at 8 percent.

AFRITAC South. 8 This will enhance the stability of Mozambique’s financial sector and facilitate
greater exchange rate flexibility, which are particularly important in the context of large, expected
FX inflows from LNG, and to improve access to credit and the FX market.
D. Financial Stability and Financial Inclusion
22. Banks are reporting somewhat weaker system-wide capital and liquidity ratios,
though NPLs remain low. At end-March 2023, the average capital adequacy ratio was
25 percent, compared to 27 percent in December 2022. NPLs systemwide were 9 percent, with
some inter-bank dispersion correlated with exposure to SOEs. Core liquid assets to short term
liabilities declined from 26 percent at end-2021 to 15 percent at end-March 2023. The BM should
continue to monitor the banking sector closely, including to assess how tighter monetary
conditions are impacting balance sheets. The BM received a general training on IFRS for central
banks. 9 The transition from Basel II to Basel III capital accords is expected to be implemented
during 2024-2026. The BM continues strengthening supervisory capacity towards cybersecurity
risks, with TA support from the IMF. Collaboration is being strengthened between the BM and
the SOE directorate (IGEPE) to intensify monitoring the risk of lending to SOEs.
23. Continued progress is being made in advancing financial inclusion. Digital currency
accounts increased from 32 percent of the adult rural population in March 2020 to 59 percent at
end-2022. The Basic Bank Account law, adopted in October 2022, is expected to promote
financial inclusion by requiring less formal documentation and reducing the legal age to open
a bank account to 18. Ongoing modernization of the payment system is expected to increase
interoperability with mobile payments providers, facilitating the use of digital money,
e-commerce, and digitalization of government benefits. Progress in that area must be
accompanied by buttressing the supervision of cybersecurity risks.
E. Structural Reforms
24. Progress in strengthening the Tribunal Administrativo (TA) to improve the

oversight of government spending. Technical assistance from the IMF will support efforts to
strengthen the TA, including by introducing timely publication of audit reports, and enhance the
efficiency and transparency of the judicial phase and allowing for real time access by the
Attorney General and law enforcement to information to identify fraud and corruption.
25. Additional governance reforms should help reduce vulnerabilities corruption.
• AML/CFT. The authorities are implementing their comprehensive action plan to address
the gaps identified in the June 2021 report of the ESAAMLG (MEFP ¶49), and in the
updated action plan adopted by the FATF Plenary in October 2022, following
8
An IMF TA mission on monetary operations in early 2023 found that over recent years, the BM has already
implemented a range of recommendations from previous TA missions.
9
On the BM’s request the training did not include the BM’s own financial statements and the BM did not request
follow-up TA on this issue.

Mozambique’s inclusion on the FATF list of jurisdictions under increased monitoring

(‘grey listing’). The amended AML/CFT laws include a definition of beneficial ownership
consistent with FATF standards, and targeted financial sanctions for terrorism financing.
The revised commercial code obliges individuals and corporates to register information
at the centralized registry of legal entities, and regulations are being updated to ensure
adequate information on beneficial ownership in companies is publicly accessible in line
with FATF standards (newly proposed structural benchmark for end-2023)
• Public probity law. The law is in the process of being amended to clarify coverage,
strengthen the definition of conflict of interest and establish reporting procedures. It also
requires submission of declarations of financial interests by public servants. Submission
to parliament is envisaged by end-June 2023 (SB).
• Public Financial Management (PFM). A renewed PFM strategy to strengthen budget

execution in emergencies is expected by end-2023 (MEFP ¶38).
PROGRAM MODALITIES AND OTHER ISSUES

26. Program conditionality has been updated to reflect the revised macroeconomic
framework and the authorities' reform commitments (MEFP, Tables 1 and 2). 10 This review
proposes modification of existing conditionality as well as new SBs, QPCs and ITs for end-March
2024 and end-June 2024, respectively. The number of outstanding SBs from July 2023 to June
2024 is 10 11; they focus on program-critical targets and tailored to the implementation capacity
of the authorities. These key elements of program conditionality are:
• A modification of the floor on the stock of net international reserves of the Bank of
Mozambique to $2bn for the next 12 months (end-June 2023 to end June 2024),
compared to an original floor of $2.2bn. With net foreign reserves currently at $2.19bn, 12
this modification provides some room for reserve fluctuations (and reduces the need for
further monetary policy tightening) while safeguarding a reserve buffer (as $2bn is
equivalent to more than 3 months of imports). .
• An additional adjustor is proposed to accommodate for shortfalls or gains in project

financing, compared with projected cumulative amounts that go through the Bank of
Mozambique reserves.
• A modification of the MPCC to lower target ranges and mid-points, such that a
consultation with the Board is triggered if inflation falls outside the ±3 percentage point
range around the 9.0 percent mid-point target band value for end-June 2023, 8.5 percent
for end-September 2023, and 8.0 percent for end-December 2023.
10
An updated TMU is attached to this staff report.
11
Consistent with the findings of the 2018 Review of Program Design and Conditionality.
12
Valued at program exchange rate (see TMU).

• To ensure wage bill control and align fiscal policy with program objectives in 2023, the
authorities committed to prior actions on (listed in Table 2 (MEFP ¶21)):
o Incorporating all public servants into the electronic payroll system (e-folha).
o Parliament approval of amendments to the wage bill law, adjusting the percentage of
the reference salary, which is applied to the calculation of the representation subsidy,
for statutorily appointed and elected holders of public office.
• Completion of general audit and "proof of life" of all public sector servants, to be
completed and reported on by the Inspector-General of Finances (IGF) is a proposed
new SB for end-September 2023.
• To ensure wage bill reducing measures consistent with medium-term fiscal sustainability
under the program, a proposed new SB (end-December 2023) on submitting to the
Council of Ministers a measures-based action plan to reduce the wage bill to 10 percent
of GDP by 2028, with IMF TA support.
• To improve governance and strengthen the efficiency of public spending, publication of

2020 and 2021 external audit reports of COVID 19 emergency expenditure, including all
findings except for those possibly involving financial responsibility, is a proposed new
SB for December 2023.
• To enhance revenue mobilization, government approval of the regulation to determine

the reference price of minerals based on international prices is a proposed new SB for
end-June 2023.
• To enhance transparency in the management of natural resources, government

commitment to make any legal and regulatory changes necessary to ensure that the
information on beneficial ownership is adequate, accurate, up to date and publicly
accessible at the centralized registry is a proposed new SB for end-December 2023.
• To enhance cash management and strengthen debt management, Treasury to prepare

weekly cash flow forecasts extending at least three months to be rolled forward at least
monthly is a proposed new SB for end-June 2024.
• To enhance SOE transparency and strengthen governance, publish the financial risks
indicators (as referenced in the MEFP, ¶43) for the complete list of entities comprising the
SOEs and other public bodies is a proposed new SB for end-March 2024.
27. In view of the authorities’ corrective measures, staff supports waivers for the
missed targets. Staff supports the request for a waiver on the missed domestic primary balance
given the authorities’ actions to ensure fiscal sustainability: (i) wage bill reducing measures
adopted earlier in 2023; and (ii) additional corrective measures composed of revenue
mobilization and wage bill reducing measures (MEFP, ¶21). In addition, staff support the
authorities’ request for a waiver for missing the target on non-accumulation of external arrears

given that these have been settled, and as the authorities are taking concrete administrative
steps to ensure such arrears are not repeated: (i) clearing the existing debt recording database to
eliminate discrepancies between creditor invoices and internal debt services estimates, and are
preparing the migration to a new system (CS-Meridian); and (ii) improving liquidity and debt
management to avoid cash crunches.
28. The program is fully financed, with firm commitments for the next twelve months
(June 2023-June 2024) and good prospects for adequate financing for the remainder of
the program period. The disbursement available under the ECF upon completion of the second
review will be used for budget support. Budget support will also be provided by the World Bank
(commitments of US$350 million over 2023–2024) and Portugal (Euros 1 million over 2023–26).
29. Capacity to repay the Fund remains adequate, but subject to risks (Table 8). Under
the baseline scenario, outstanding obligations to the Fund based on existing and prospective
drawings would peak at 3.7 percent of GDP in 2024, or about 28 percent of gross international
reserves. Downside risks include failure of the onshore LNG projects, natural disasters, and fiscal
risks that could reduce the government’s debt service capacity. Risks are mitigated by the
authorities’ strong track record of servicing their debt obligations to the Fund, policy measures
envisaged in the program, and smooth phasing of disbursements.
30. The BM has made progress in implementing the 2020 safeguards assessment
recommendations. Financial statements of the BM for 2022 were published in March 2023.
A review of the operational risk framework is ongoing, with support from IMF TA, while the
control over vault access is being improved in line with earlier TA recommendations. The draft
organic law of the BM is expected to be submitted to parliament in June 2024.
31. CD is aligned with program objectives, and data provision is broadly adequate for
program monitoring. Priority areas include PFM, fiscal policy, revenue administration, natural
resource management, wage bill reform, governance, and fiscal transparency (including SOEs),
monetary policy implementation, and government finance, real, and financial sector statistics.
Mozambique is a high intensity user of Fund CD with a solid implementation record.
32. The government has made progress on the updated National Development
Strategy (ENDE). Staff and the authorities have agreed to use the updated National
Development Strategy (ENDE) as a Poverty Reduction and Growth Strategy (PRGS) under the
program. Under the advice of the technical council of the MEF, the government extended the
stakeholder consultations. The strategy is now expected to be submitted to Parliament by
September. The authorities are requesting an extension of the PRGS requirement until the fourth
review, given limited institutional capacity—including extension to the stakeholders’
consultations, delays in addressing all comments and uncertain duration of the Parliamentary
approval process.

STAFF APPRAISAL
33. The economic recovery is strengthening, despite Mozambique being hard hit by
cyclone Freddy. Resurgent activity in COVID-affected sectors, the launch of LNG extraction, and
robust production in agriculture and mining have contributed to a broad-based acceleration of
growth. Inflation has decelerated rapidly in line with lower import prices, while domestic price
increases have remained muted amid tight monetary policy.
34. Performance under the program has been broadly favorable, though with notable
slippage in the fiscal area. PCs on net international reserves and new non-concessional external
debt were met, while the PCs on the domestic primary balance and external arrears were missed.
The MPCC band was breached at the lower end as inflation decelerated faster than expected. IT
on new external debt were met, but the ceiling on the domestic debt stock was breached and the
floor on social spending was not met. Progress on the structural front has been good: the SBs on
the SWF law, Treasury budget, and e-SISTAFE, and attrition rules for civil servants were met
though, the SB on eliminating exemptions from VAT was missed.
35. The authorities are taking broad-based and meaningful measures to ensure fiscal
discipline in 2023 and achieve the medium-term fiscal consolidation envisaged under the
program. The fiscal package is composed of revenue-enhancing and wage bill reducing
measures. In addition, and to help rationalize the wage bill over the medium term, the authorities
have committed to prepare an action plan setting out concrete measures to reduce the wage bill
to 10 percent of GDP by 2028. They have also committed to enhanced monitoring of wage bill
performance, which will facilitate quicker action—if needed—to keep expenditure on track.
36. Fiscal structural reforms aimed at wage bill control, SOE transparency, and debt
management will help achieve fiscal policy objectives. Wage bill control is macro-critical to
ensure medium-term fiscal consolidation and bring Mozambique’s spending on public
employment in line with regional peers, and to create fiscal space for high-priority spending on
education, health, and infrastructure. Improving the coordination between cash and debt
management functions and implementing the MTDS will strengthen debt management and
budget execution. Strengthening SOE management and oversight will help prevent expenditure
overruns, increase transparency, and reduce a key fiscal risk.
37. The current stance of monetary policy is appropriate to contain inflationary

pressures. Staff support the BM’s proactive approach, including undertaking additional
tightening if needed, to help anchor inflationary pressure and support macroeconomic stability.
Options for looser policy should be explored once the policy mix between fiscal and monetary
has been rebalanced in a sustainable manner, and external and internal inflationary pressures
have abated. Improving the transmission of the policy rate by deepening the interbank, money,
and FX markets over the medium term remains important for improved macroeconomic
management, and to allow greater exchange rate flexibility to cope with external shocks. Staff
welcomes the recent reduction in the BM’s supply of FX to cover fuel import bills and its decision
to cease this practice starting June 2023.

38. Staff supports the completion of the second review under the ECF arrangement, the
waivers for the missed QPCs, the completion of the consultation under the MPCC, the requests
for modification of the MPCC from end-June 2023 to end-September 2023, and the extension of
the PRGS requirement until the fourth review. Staff supports the completion of the financing
assurance review on the basis that adequate safeguards remain in place for the further use of the
Fund’s resources in Mozambique’s circumstances and that Mozambique’s adjustment efforts
have not been undermined by developments in debtor-creditor relations. 13
13
The financing assurance review is in respect of the arrears to Brazil.

Figure 1. Mozambique: Growth and Living Standards
Since 2015, a series of shocks has eroded Mozambique’s Mozambique’s living conditions steadily improved through 2019,
prior strong growth in GDP. though remained relatively low for SSA.
Real GDP Growth

(Mozambique vs SSA; Percent)
14
12
10
8
6
4
2
0
-2 Interquartile Range
-4 Mozambique
-6 SSA Median
-8
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
… and gender disparities continue to decline, with Mozambique

Life expectancy improved through 2020…
outperforming the SSA median SSA country.
While poverty has declined… …inequalities are acute.
Poverty Headcount Ratio

(In percent of population)
90
$1.90 a day
80 (2011 PPP)
National
70 poverty line
60
50
40
30
1996 2002 2008 2014 2018 2019 2020 E
Sources: World Bank World Development Indicators, UN Human Development Report, UN Population Division, World Bank Poverty
and Equity Database, World Bank Macro Poverty Outlook, and IMF staff calculations.

Figure 2. Mozambique: COVID-19 Pandemic, Growth, and Inflation
The latest COVID wave has had a minimal impact… …and deaths have declined sharply.
COVID-19 Infections and Policy Response COVID-19 Deaths and Vaccinations

100 3000 1.8 100
1.6 90
80 2500 80
1.4
2000 1.2 70
60 1
60
1500 50
0.8
40 40
1000 0.6 30
0.4 20
20 500 0.2 10
0 0
0 0
Nov-20
Nov-21
Nov-22
Mar-21
May-21
Mar-22
May-22
Mar-23
May-23
Sep-20
Jan-21
Sep-21
Jan-22
Sep-22
Jan-23
Jul-20
Jul-21
Jul-22
Nov-20
Nov-21
Nov-22
Mar-21
May-21
Mar-22
May-22
Mar-23
May-23
Sep-20
Jan-21
Sep-21
Jan-22
Sep-22
Jan-23
Jul-20
Jul-21
Jul-22
Mozambique new daily cases (rhs) MOZ share of people vaccinated at least once (rhs)
SSA avg. stringency index SSA average daily new deaths per million (7-day MA)
Mozambique stringency index MOZ daily new deaths per million (7-day MA)
…with the Purchasing Managers’ Index suggesting a slight

The recovery broadened through the fourth quarter…
improvement in Q1 2023.
Inflation peaked in August 2022… …and continues to be driven by food and fuel prices.
Sources: National Institute of Statistics and IMF Staff Calculations.

Figure 3. Mozambique: Monetary and Financial Developments
… while the MZN/USD exchange rate has been held flat since mid-
Tight monetary policy is helping to contain inflation…
2021.
Exchange Rates
80 5.5
Mozambique Metical per US Dollar
Mozambique Metical per ZA Rand (rhs)
75 5
70 4.5
65 4
60 3.5
55 3
Jan-19
Apr-19
Jan-20
Apr-20
Jan-21
Apr-21
Jan-22
Apr-22
Jan-23
Apr-23
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Jul-22
Oct-22
Foreign exchange intervention by the BM is mostly limited to
Liquidity is managed through open market operations.
providing FX liquidity for fuel imports.
FX Interventions and Spot Exchange Rate

(In Million US dollars)
200 80
150 70
100 60
50 50
0 40
-50 FX sale, other 30
FX sale for fuel imports
-100 20
FX Purchase
-150 MZN/USD (rhs) 10
-200 0
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Jun-19
Jun-20
Jun-21
Jun-22
Dec-19
Dec-20
Dec-21
Dec-22
Sep-19
Sep-20
Sep-21
Reported overall NPLs have increased slightly while provisioning Sep-22

Real credit to the economy is still constrained by tight policy.
rates remain relatively steady.
Sources: IMF staff calculations and Bank of Mozambique.

Figure 4. Mozambique: Selected External Sector Developments
The non-megaproject current account deficit has widened

...while Mozambique’s trade competitiveness has eroded.
somewhat…
Current Account Balance Effective Exchange Rates

(In Percent of GDP) (Index)
10 135
0 125
115
-10
105
-20 95
85
-30
75
-40 Total 65
Nominal Real
Excl. mega-projects 55
-50
45
Excl. mega-projects and mega-projects-related firms
-60
Nov-19
Nov-20
Nov-21
Nov-22
Mar-19
May-19
Mar-20
May-20
Mar-21
May-21
Mar-22
May-22
Mar-23
Jan-19
Sep-19
Jan-20
Sep-20
Jan-21
Sep-21
Jan-22
Sep-22
Jan-23
Jul-19
Jul-20
Jul-21
Jul-22
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
Financial flows in 2022 were dominated by trade credit to
International reserves have declined but remain adequate.
finance the LNG platform…
Gross International Reserves Financial Account Balance

5 8 (Percent of GDP)
30
4 7 20
6 10
3 0
5 -10
2 -20
4
-30
1 3 -40
Reserve Assets
0 2 -50 Other Investment
-60 Direct Investment
Nov-19
Nov-20
Nov-21
Nov-22
Jul-19
Sep-19
Jul-20
Sep-20
Jul-21
Sep-21
Jul-22
Sep-22
May-19
May-20
May-21
May-22
Mar-19
Mar-20
Mar-21
Mar-22
Jan-19
Jan-20
Jan-21
Jan-22
-70 Portfolio Investment & Derivatives

Financial Account Balance
-80
Billion USD
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Months of Imports (rhs)
Months of Imports (excl. mega-projects, rhs)
External debt increased in 2022, driven by private sector financing needs
External Debt
(Percent of GDP)
200
Other Private Sector Debt
150 Mega-projects-related Private Sector

Debt
Public Sector Debt

100
50
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Sources: Mozambican authorities and IMF staff estimates.

Figure 5. Mozambique: Fiscal Developments

Revenue remains high and stable despite various shocks… …but spending increased in 2022.
The fiscal balance has been improving over the past few years, Domestic issuance rose sharply in 2022 to meet fiscal
except for wage bill-related slippages in 2022. overruns.
Debt ratios are stabilizing as the economy recovers… … though borrowing costs from domestic debt have increased.

Table 1. Mozambique: Selected Economic and Financial Indicators, 2020–28

2020 2021 2022 2023 2024 2025 2026 2027 2028
First rev First rev First rev
Est. Prel. Proj. Proj. Proj. Proj. Proj. Proj. Proj.
ECF ECF ECF
National income and prices (Percentage change, unless otherwise indicated)

Real GDP -1.2 2.4 3.8 4.2 5.0 7.0 8.3 5.0 5.0 4.0 13.1 12.1
Real GDP, excl. extractive industiries -0.1 2.4 3.4 3.9 3.7 3.7 4.1 4.1 4.0 4.0 3.9 4.0
Nominal GDP 2.2 7.1 10.6 16.1 13.2 15.6 16.7 12.7 12.3 10.4 19.6 18.2
GDP deflator 3.4 4.6 6.5 11.5 7.8 8.1 7.8 7.4 7.0 6.2 5.7 5.5
Consumer prices (end of period) 3.5 6.7 15.0 10.3 8.5 6.7 6.1 6.5 5.7 5.5 5.5 5.5
Consumer prices (annual average) 3.1 5.7 10.7 9.8 11.5 7.4 7.3 6.5 6.3 5.7 5.5 5.5
GDP (billions of meticais) 983 1,053 1,142 1,223 1,292 1,414 1,509 1,594 1,790 1,977 2,364 2,796
GDP (billions of US dollars) 14.2 16.1 17.9 19.2 19.7 21.9 21.9 23.9 25.6 27.0 31.1 35.5
GDP per capita (US dollars) 454 502 541 581 582 647 629 686 714 734 822 914
Investment and savings (Percent of GDP)

Gross domestic investment 50.8 34.0 67.8 51.0 37.8 31.9 61.5 54.5 59.5 60.4 50.3 41.1
Gross domestic savings, excl. grants 23.3 11.6 26.3 18.2 23.2 16.3 26.0 15.6 16.3 15.5 19.6 21.1
Central government (Percent of GDP)

Total revenue 1/ 23.9 25.3 25.7 23.4 25.9 23.5 25.7 24.6 25.3 25.7 25.1 24.4
of which: LNG revenues N.A. N.A. N.A. N.A. 0.1 0.1 0.3 0.3 0.3 0.3 0.7 1.0
Total expenditure and net lending 32.9 30.9 33.2 32.3 33.3 30.2 30.7 28.6 28.0 28.0 25.9 23.9
of which: current expenditure 23.3 23.6 26.1 25.8 24.8 23.6 24.1 23.6 22.7 21.8 20.0 18.1
Overall fiscal balance, before grants -9.3 -6.8 -8.2 -8.8 -7.4 -6.7 -5.0 -4.0 -2.7 -2.3 -0.8 0.6
Grants 3.6 2.1 4.4 3.9 3.5 3.8 1.7 1.8 1.6 1.8 1.5 1.6
Overall fiscal balance, after grants -5.7 -4.7 -3.7 -4.9 -3.9 -2.8 -3.3 -2.2 -1.1 -0.5 0.6 2.1
Overall fiscal balance before LNG revenues, after grants -5.7 -4.7 -3.7 -4.9 -4.0 -2.9 -3.6 -2.5 -1.4 -0.8 -0.1 1.1
Primary fiscal balance, after grants -2.6 -2.0 -0.2 -2.0 -0.7 0.4 0.0 0.8 1.7 1.8 2.8 3.9
Public sector debt (Percent of GDP) 2/
Nominal stock of total debt 120.0 104.9 102.9 95.5 101.4 89.7 102.6 92.8 90.6 87.9 75.0 61.3
of which: external 97.8 81.2 77.6 71.1 75.9 65.6 77.7 69.0 68.3 66.8 57.9 47.4
Money and credit (Percentage change, unless otherwise indicated)

Reserve money 9.0 -14.3 -5.1 0.6 11.2 85.9 14.0 9.3 11.4 12.2 14.6 14.4
Broad Money (M3) 23.3 1.9 2.3 8.7 11.8 5.2 12.6 8.1 11.3 10.1 14.9 14.8
Percent of GDP 59.4 56.5 53.3 52.9 52.7 48.1 50.8 46.1 45.7 45.6 43.8 42.5
Credit to the economy 13.1 5.2 3.0 4.0 11.5 6.0 12.0 12.0 10.0 10.0 12.0 9.5
Percent of GDP 26.4 25.9 24.6 23.2 24.3 21.2 23.3 21.1 20.7 20.6 19.3 17.9
Policy rate (percent) 3/ 10.25 13.25 17.25 17.25 … 17.25 … … … … … …
External sector (Percent of GDP, unless otherwise indicated)

Current account balance -27.6 -22.4 -41.5 -32.9 -14.7 -15.5 -35.5 -38.9 -43.2 -44.9 -30.7 -20.0
excl. megaprojects -28.2 -34.1 -33.9 -29.5 -31.7 -30.7 -29.3 -29.8 -29.1 -28.4 -27.4 -25.1
excl. megaprojects (MP) and indirect MP imports -18.2 -21.9 -16.2 -20.1 -19.3 -21.9 -17.0 -21.3 -20.6 -20.0 -19.7 -18.0
Merchandise exports 25.3 34.7 43.4 43.2 38.3 37.2 39.3 35.3 34.8 34.2 38.8 41.3
excl. megaprojects 7.7 9.6 9.9 11.0 9.8 8.9 9.2 8.7 8.9 9.3 8.8 8.6
Merchandise imports 41.6 48.7 74.6 69.6 43.5 44.3 46.2 47.3 46.9 46.3 40.8 35.9
excl. megaprojects 36.1 43.8 43.5 41.2 39.1 39.8 36.0 37.3 36.3 35.8 32.8 30.5
Net foreign direct investment 21.4 31.7 17.1 10.3 7.6 4.3 13.2 13.7 15.6 16.3 7.9 9.3
Terms of trade (Percentage change) -1.2 1.9 -3.4 -2.8 -0.4 6.6 1.4 0.6 1.4 1.4 1.0 0.6
Gross international reserves (millions of US dollars, end of period) 4,070 3,470 2,905 2,888 3,031 2,939 3,389 3,184 3,536 3,977 4,464 5,865
Months of next year's non-megaproject imports 5.9 4.5 3.7 3.4 3.8 3.4 4.2 3.5 3.7 3.9 4.2 5.1
Net international reserves (millions of US dollars, end of period) 3,493 2,927 2,234 2,333 2,265 2,288 2,512 2,422 2,766 3,292 3,873 5,397
Exchange rate
Meticais per US dollar, end of period 74.9 63.8 ... 63.9 ... 65.1 ... 68.3 … 71.6 … 74.7 … 77.4 … 80.0
Meticais per US dollar, period average 69.5 65.5 ... 63.9 ... 64.5 ... 66.7 … 69.9 … 73.2 … 76.0 … 78.7
Real effective exchange rate (Percentage change) -5.4 2.9 ... 13.3 ... N.A. ... N.A. N.A. N.A. N.A. N.A.

1/ Net of verified VAT refund requests.
2/ Public sector debt includes central government debt, ENH debt and SOE domestic debt.
3/ Mozambique Interbank Market Offer rate (MIMO, latest as of February 2023).

Table 2a. Mozambique: Government Finances, 2019–28

(Billions of Meticais)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
ECF 1st ECF 1st ECF 1st

Est. Est. Est. Est. Proj. Proj. Proj. Proj. Proj. Proj.
Review Review Review
Total revenue ¹ 278.9 235.3 265.9 293.6 286.0 334.3 332.7 387.6 392.4 452.6 507.9 592.5 682.8
Tax revenue 242.2 196.7 221.7 248.7 244.3 283.0 284.8 330.3 339.1 393.2 442.3 519.3 601.3
Income and profits 144.3 99.4 99.9 122.5 128.3 130.0 153.7 153.4 180.1 208.1 237.0 267.1 299.4
Of which: Capital gains tax 54.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Goods and services ¹ 74.0 72.1 91.4 94.0 83.7 115.8 92.7 130.1 111.5 128.7 141.0 167.3 197.1
International trade 17.1 15.1 18.0 18.5 18.4 19.7 21.7 22.0 23.8 27.7 32.2 37.5 44.0
Other 6.8 10.1 12.5 13.8 13.9 17.4 16.7 24.7 23.6 28.7 32.1 47.4 60.8
Of which: Revenue from LNG … … … … … 1.3 1.1 4.7 4.2 5.1 5.1 17.6 28.0
Nontax revenue 36.8 38.6 44.2 44.9 41.7 51.3 47.9 57.4 53.4 59.4 65.7 73.2 81.5
Total expenditure and net lending 271.7 323.3 325.6 379.3 395.3 429.9 427.1 463.1 456.5 501.1 553.6 612.2 666.8
Current expenditure 196.5 229.6 248.1 298.4 315.2 320.4 334.1 363.9 376.9 407.0 431.2 471.9 505.0
Compensation to employees 117.3 130.1 145.1 166.6 200.6 181.8 206.5 203.7 236.3 255.5 272.7 291.1 309.8
Of which: Social insurance 4.5 5.7 5.9 6.1 6.3 6.1 6.4 6.8 6.4 6.4 6.8 7.2 7.5
Goods and services 25.7 41.0 44.8 49.7 47.6 58.3 40.8 65.5 47.7 54.2 59.9 71.1 84.3
Interest on public debt 31.2 30.7 28.1 39.9 35.4 41.5 45.6 49.4 48.3 49.2 45.6 51.4 48.6
Domestic 17.3 15.8 17.6 29.0 24.1 29.9 34.4 38.1 35.2 36.0 32.3 38.2 36.2
External 13.9 14.9 10.5 10.9 11.3 11.6 11.2 11.3 13.0 13.2 13.3 13.2 12.4
Subsidies and transfers 22.3 27.7 30.1 42.1
0.0 31.6 38.8
0.0 41.1 45.2
0.0 44.6 48.2 53.0 58.3 62.3
Capital expenditure 68.8 86.9 73.9 76.3 77.2 105.0 89.4 94.4 75.6 89.6 117.5 135.1 156.2
Domestically financed 33.5 44.1 34.7 31.4 35.9 43.9 33.2 47.6 32.9 39.4 59.7 70.6 86.5
Externally financed 35.3 42.9 39.2 44.9 41.3 61.0 56.2 46.9 42.7 50.3 57.7 64.5 69.7
Grants 9.3 20.1 18.7 20.1 29.8 35.3 34.7 19.2 18.6 22.4 28.1 35.1 43.6
Investment projects 5.1 15.6 11.78 11.1 26.2 26.9 26.5 10.7 10.3 12.5 15.6 19.5 24.2
Special programs 4.3 4.5 6.9 6.5 3.5 7.0 6.9 8.5 8.3 10.0 12.5 15.6 19.4
Direct financing 0.0 0.0 0.0 2.6 0.0 1.3 1.3 0.0 0.0 0.0 0.0 0.0 0.0
Loans 25.9 22.8 20.5 24.8 11.5 25.8 21.4 27.7 24.1 27.9 29.6 29.4 26.1
Net lending ² 6.4 6.8 3.6 4.7 2.9 4.5 3.6 4.8 4.0 4.5 5.0 5.2 5.6
Statistical Discrepancy 1.7 -3.3 -11.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unallocated revenue (+)/ expenditure (-) -15.5 0.0 0.0 -7.7 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Overall balance, before grants -6.5 -91.3 -71.4 -93.4 -107.6 -95.6 -94.3 -75.5 -64.1 -48.5 -45.7 -19.7 17.0
Grants received 9.3 35.1 22.1 50.7 47.8 45.1 54.1 26.0 28.6 29.4 35.5 35.1 43.6
Project support 9.3 20.1 18.7 28.4 29.8 35.3 34.7 19.2 18.6 22.4 28.1 35.1 43.6
Budget support 0.0 15.1 3.4 22.4 18.0 9.8 19.4 6.9 10.0 7.0 7.3 0.0 0.0
Primary balance, after grants 34.0 -25.6 -21.2 -2.7 -24.3 -9.1 5.4 0.0 12.8 30.1 35.4 66.7 109.2
Overall balance, after grants 2.8 -56.2 -49.3 -42.6 -59.8 -50.5 -40.2 -49.4 -35.5 -19.1 -10.2 15.3 60.6
Financing -2.8 56.2 49.3 42.6 59.7 50.5 40.2 49.4 35.5 19.1 10.2 -15.3 -59.6
Net external financing 16.9 23.4 10.4 7.3 0.2 3.3 -1.2 3.6 0.8 -1.0 -4.9 -7.1 -27.0
Disbursements 38.7 48.2 23.3 37.5 24.1 36.6 29.8 39.0 32.8 32.8 30.4 30.0 26.6
Project 25.9 22.8 20.5 24.8 11.5 25.8 21.4 27.7 24.1 27.9 29.6 29.4 26.1
Nonproject support 12.8 25.4 2.7 12.7 12.6 10.8 8.4 11.3 8.7 5.0 0.8 0.6 0.5
Of which budget support (including IMF) 7.4 20.7 0.0 9.9 12.4 8.1 7.9 8.5 8.1 4.3 0.0 0.0 0.0
Amortization -21.8 -24.8 -12.8 -30.2 -23.9 -33.3 -31.0 -35.4 -32.1 -33.8 -35.3 -37.1 -53.6
Net domestic financing -27.1 21.8 33.7 43.7 60.7 47.2 49.4 45.8 34.7 20.1 15.1 -8.2 -32.6
Of which: short term debt (net) 8.7 14.5 13.7 21.4 12.0 -5.6 41.4 -29.5 -3.5 -7.0 10.3 -16.3 -5.7
Of which: issuances of medium term debt 23.5 52.1 39.2 32.4 51.5 68.3 25.0 102.9 61.4 72.1 96.0 57.9 44.6
o.w. SDR allocation 13.4 13.4 6.1 5.7
Of which: amortization of medium term debt -27.3 -29.3 -26.1 -16.9 -11.7 -24.3 -26.5 -26.5 -20.2 -44.2 -88.4 -53.8 -54.5
Change in Deposits -32.0 -15.6 6.9 6.8 8.9 8.8 9.5 -1.1 -3.1 -0.8 -2.7 4.0 -17.0
Float from previous year³ -2.5 -4.4 -9.5 -8.4 -9.2 0.0 -8.0 0.0 0.0 0.0 0.0 0.0 0.0
Float at the end of the year³ 4.4 9.5 9.2 0.0 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Exceptional financing (external debt service)⁴ 5.5 5.9 5.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financing gap 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0
Memorandum items:
Primary balance after grants (excl. the one-off 2019
capital gains tax revenues) -20.2 -25.6 -21.2 -2.7 -24.3 -9.1 5.4 0.0 12.8 30.1 35.4 66.7 109.2
Domestic primary balance⁵ 64.6 -8.5 10.2 2.7 -30.6 9.7 8.0 23.6 27.5 51.6 58.5 96.8 134.8
Stock of Government Deposits 117.1 132.6 125.7 118.2 116.8 109.3 107.3 110.4 110.4 111.2 113.9 109.9 126.9

1
VAT presented on a net basis (collection minus requested VAT refunds).
2
Externally financed loans to SOEs.
³ The float from previous year consists in other accounts receivable, the float at the end of the year consists in other account payable.
4
Exceptional financing for external debt under renegotiation.
⁵ Revenue less grants, minus domestically financed primary expenditure (ie. expenditure, less net interest payments and foreign financed investment).

Table 2b. Mozambique: Government Finances, 2019–28

(Percent of GDP)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
ECF 1st ECF 1st ECF 1st
Est. Est. Est. Est. Difference Proj. Difference Proj. Proj. Proj. Proj. Proj.
Review Review Review
Total revenue ¹ 29.0 23.9 25.3 25.7 23.4 -2.3 25.9 23.5 -2.3 25.7 24.6 25.3 25.7 25.1 24.4
Tax revenue 25.2 20.0 21.1 21.8 20.0 -1.8 21.9 20.1 -1.8 21.9 21.3 22.0 22.4 22.0 21.5
Taxes on income and profits 15.0 10.1 9.5 10.7 10.5 -0.2 10.1 10.9 0.8 10.2 11.3 11.6 12.0 11.3 10.7
Of which : Capital gains tax 5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Taxes on goods and services 1 7.7 7.3 8.7 8.2 6.8 -1.4 9.0 6.6 -2.4 8.6 7.0 7.2 7.1 7.1 7.1
Taxes on international trade 1.8 1.5 1.7 1.6 1.5 -0.1 1.5 1.5 0.0 1.5 1.5 1.5 1.6 1.6 1.6
Other taxes 0.7 1.0 1.2 1.2 1.1 -0.1 1.3 1.2 -0.2 1.6 1.5 1.6 1.6 2.0 2.2
Of which : Revenue from LNG … … … … … 0.1 0.1 0.0 0.3 0.3 0.3 0.3 0.7 0.9
Nontax revenue 3.8 3.9 4.2 3.9 3.4 -0.5 4.0 3.4 -0.6 3.8 3.3 3.3 3.3 3.1 2.9
Total expenditure and net lending 28.2 32.9 30.9 33 32.3 -0.9 33.3 30.2 -3.1 30.7 28.6 28.0 28.0 25.9 23.9
Current expenditure 20.4 23.3 23.6 26.1 25.8 -0.36 24.8 23.6 -1.2 24.1 23.6 22.7 21.8 20.0 18.1
Compensation to employees 12.2 13.2 13.8 14.6 16.4 1.8 14.1 14.6 0.5 13.5 14.8 14.3 13.8 12.3 11.1
Of which : Social insurance 0.5 0.6 0.6 0.5 0.5 0.0 0.5 0.4 0.0 0.5 0.4 0.4 0.3 0.3 0.2
Goods and services 2.7 4.2 4.3 4.4 3.9 -0.5 4.5 2.9 -1.6 4.3 3.0 3.0 3.0 3.0 3.0
Interest on public debt 3.2 3.1 2.7 3.5 2.9 -0.6 3.2 3.2 0.0 3.3 3.0 2.7 2.3 2.2 1.7
Domestic 1.8 1.6 1.7 2.5 2.0 -0.6 2.3 2.4 0.1 2.5 2.2 2.0 1.6 1.6 1.3
External 1.4 1.5 1.0 1.0 0.9 0.0 0.9 0.8 -0.1 0.8 0.8 0.7 0.7 0.6 0.4
Subsidies and transfers 2.3 2.8 2.9 3.7 2.6 -1.1 3.0 2.9 -0.1 3.0 2.8 2.7 2.7 2.5 2.2
Capital expenditure 7.1 8.8 7.0 6.7 6.3 -0.4 8.1 6.3 -1.8 6.3 4.7 5.0 5.9 5.7 5.6
Domestically financed 3.5 4.5 3.3 2.7 2.9 0.2 3.4 2.4 -1.0 3.2 2.1 2.2 3.0 3.0 3.1
Externally financed 3.7 4.4 3.7 3.9 3.4 -0.6 4.7 4.0 -0.8 3.1 2.7 2.8 2.9 2.7 2.5
2
Net lending 0.7 0.7 0.3 0.4 0.2 -0.2 0.4 0.3 -0.1 0.3 0.2 0.2 0.3 0.2 0.2
Statistical Discrepancy 0.2 -0.3 -1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unallocated revenue (+)/ expenditure (-) -1.6 0.0 0.0 -0.7 0.1 0.8 … … … … … … … …
Overall balance, before grants -0.7 -9.3 -6.8 -8.2 -8.8 -0.6 -7.4 -6.7 0.7 -5.0 -4.0 -2.7 -2.3 -0.8 0.6
Grants received 1.0 3.6 2.1 4.4 3.9 -0.5 3.5 3.8 0.3 1.7 1.8 1.6 1.8 1.5 1.6
Project support 1.0 2.0 1.8 2.5 2.4 -0.1 2.7 2.5 -0.3 1.3 1.2 1.3 1.4 1.5 1.6
Budget support 0.0 1.5 0.3 2.0 1.5 -0.5 0.8 1.4 0.6 0.5 0.6 0.4 0.4 0.0 0.0
Primary balance, after grants 3.5 -2.6 -2.0 -0.2 -2.0 -1.7 -0.7 0.4 1.1 0.0 0.8 1.7 1.8 2.8 3.9
Overall balance, after grants 0.3 -5.7 -4.7 -3.7 -4.9 -1.2 -3.9 -2.8 1.1 -3.3 -2.2 -1.1 -0.5 0.6 2.1
0.0 0.0 0.0 0.0 0.0
Financing -0.3 5.7 4.7 3.7 4.9 1.2 3.9 2.8 -1.1 3.3 2.2 1.1 0.5 -0.6 -2.1
Net external financing 1.8 2.4 1.0 0.6 0.0 -0.6 0.3 -0.1 -0.3 0.2 0.0 -0.1 -0.2 -0.3 -1.0
Disbursements 4.0 4.9 2.2 3.3 2.0 -1.3 2.8 2.1 -0.7 2.6 2.1 1.8 1.5 1.3 1.0
Project 2.7 2.3 2.0 2.2 0.9 -1.2 2.0 1.5 -0.5 1.8 1.5 1.6 1.5 1.2 0.9
Nonproject support 1.3 2.6 0.3 1.1 1.0 -0.1 0.8 0.6 -0.2 0.7 0.5 0.3 0.0 0.0 0.0
Of which budget support (including IMF) 0.8 2.1 0.0 0.9 1.0 0.1 0.6 0.6 -0.1 0.6 0.5 0.2 0.0 0.0 0.0
Amortization -2.3 -2.5 -1.2 -2.6 -2.0 0.7 -2.6 -2.2 0.4 -2.3 -2.0 -1.9 -1.8 -1.6 -1.9
Net domestic financing -2.8 2.2 3.2 3.8 5.0 1.1 3.7 3.5 -0.2 3.0 2.2 1.1 0.8 -0.3 -1.2
Of which: short term debt (net) 0.9 1.5 1.3 1.9 1.0 -0.9 -0.4 2.9 3.4 -2.0 -0.2 -0.4 0.5 -0.7 -0.2
Of which: issuances of medium term debt 2.4 5.3 3.7 2.8 4.2 1.4 5.3 1.8 -3.5 6.8 3.9 4.0 4.9 2.4 1.6
o.w. SDR allocation 1.2 1.1 -0.1 0.0 0.4 0.4
Of which: amortization of medium term debt -2.8 -3.0 -2.5 -1.5 -1.0 0.5 -1.9 -1.9 0.0 -1.8 -1.3 -2.5 -4.5 -2.3 -2.0
Change in Deposits -3.3 -1.6 0.7 0.6 0.7 0.1 0.7 0.7 0.0 -0.1 -0.2 0.0 -0.1 0.2 -0.6
0.0 0.0 0.0
Float from previous year³ -0.3 -0.4 -0.9 -0.7 -0.8 0.0 0.0 -0.6 -0.6 0.0 0.0 0.0 0.0 0.0 0.0
Float at the end of the year³ 0.5 1.0 0.9 0.0 0.7 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4
Exceptional financing (external debt service) 0.6 0.6 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financing gap 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Memorandum items:
Primary balance after grants (excl. the one-off and 2019 capital gains tax
revenues) -2.1 -2.6 -2.0 -0.2 -2.0 -1.7 -0.7 0.4 1.1 0.0 0.8 1.7 1.8 2.8 3.9
Domestic primary balance⁵ 6.7 -0.9 1.0 0.2 -2.5 -2.7 0.7 0.6 -0.2 1.6 1.7 2.9 3.0 4.1 4.8
Stock of Government Deposits 12.2 13.5 11.9 10.3 9.5 -0.8 8.5 7.6 -0.9 7.3 6.9 6.2 5.8 4.6 4.5

1
2
³ The float from previous year consists in other accounts payable, the float at the end of the year consistes in other account receivable.
4
Exceptional financing for the external debt service under negotiations.

Table 2c. Mozambique: Government Finances, 2019–28

(Percent of non-LNG GDP)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Est. Est. Est. Proj.
Total revenue ¹ 29.0 23.9 25.3 23.5 24.3 25.6 26.5 26.9 28.5 29.8
Tax revenue 25.2 20.0 21.1 20.0 20.8 22.1 23.0 23.5 25.0 26.2
Taxes on income and profits 15.0 10.1 9.5 10.5 11.2 11.8 12.2 12.6 12.8 13.1
Of which : Capital gains tax 5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Taxes on goods and services 1 7.7 7.3 8.7 6.9 6.8 7.3 7.5 7.5 8.0 8.6
Taxes on international trade 1.8 1.5 1.7 1.5 1.6 1.6 1.6 1.7 1.8 1.9
Other taxes 0.7 1.0 1.2 1.1 1.2 1.5 1.7 1.7 2.3 2.7
Of which : Revenue from LNG … … … … 0.1 0.3 0.3 0.3 0.8 1.2
Nontax revenue 3.8 3.9 4.2 3.4 3.5 3.5 3.5 3.5 3.5 3.6
Total expenditure and net lending 28.2 32.9 30.9 32.4 31.2 29.8 29.4 29.4 29.4 29.1
Current expenditure 20.4 23.3 23.6 25.9 24.4 24.6 23.9 22.9 22.7 22.0
Compensation to employees 12.2 13.2 13.8 16.5 15.1 15.4 15.0 14.5 14.0 13.5
Of which : Social insurance 0.5 0.6 0.6 0.5 0.5 0.4 0.4 0.4 0.3 0.3
Goods and services 2.7 4.2 4.3 3.9 3.0 3.1 3.2 3.2 3.4 3.7
Interest on public debt 3.2 3.1 2.7 2.9 3.3 3.2 2.9 2.4 2.5 2.1
Domestic 1.8 1.6 1.7 2.0 2.5 2.3 2.1 1.7 1.8 1.6
External 1.4 1.5 1.0 0.9 0.8 0.9 0.8 0.7 0.6 0.5
Subsidies and transfers 2.3 2.8 2.9 2.6 3.0 2.9 2.8 2.8 2.8 2.7
Capital expenditure 7.1 8.8 7.0 6.3 6.5 4.9 5.3 6.2 6.5 6.8
Domestically financed 3.5 4.5 3.3 2.9 2.4 2.2 2.3 3.2 3.4 3.8
Externally financed 3.7 4.4 3.7 3.4 4.1 2.8 2.9 3.1 3.1 3.0
2
Net lending 0.7 0.7 0.3 0.2 0.3 0.3 0.3 0.3 0.3 0.2
Statistical Discrepancy 0.2 -0.3 -1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unallocated revenue (+)/ expenditure (-) -1.6 0.0 0.0 0.1 … … … … … …
Overall balance, before grants -0.7 -9.3 -6.8 -8.8 -6.9 -4.2 -2.8 -2.4 -0.9 0.7
Grants received 1.0 3.6 2.1 3.9 4.0 1.9 1.7 1.9 1.7 1.9
Project support 1.0 2.0 1.8 2.4 2.5 1.2 1.3 1.5 1.7 1.9
Budget support 0.0 1.5 0.3 1.5 1.4 0.7 0.4 0.4 0.0 0.0
Primary balance, after grants 3.5 -2.6 -2.0 -2.0 0.4 0.8 1.8 1.9 3.2 4.8
Overall balance, after grants 0.3 -5.7 -4.7 -4.9 -2.9 -2.3 -1.1 -0.5 0.7 2.6
Financing -0.3 5.7 4.7 4.9 2.9 2.3 1.1 0.5 -0.7 -2.6
Net external financing 1.8 2.4 1.0 0.0 -0.1 0.1 -0.1 -0.3 -0.3 -1.2
Disbursements 4.0 4.9 2.2 2.0 2.2 2.1 1.9 1.6 1.4 1.2
Project 2.7 2.3 2.0 0.9 1.6 1.6 1.6 1.6 1.4 1.1
Nonproject support 1.3 2.6 0.3 1.0 0.6 0.6 0.3 0.0 0.0 0.0
Of which budget support (including IMF) 0.8 2.1 0.0 1.0 0.6 0.5 0.3 0.0 0.0 0.0
Amortization -2.3 -2.5 -1.2 -2.0 -2.3 -2.1 -2.0 -1.9 -1.8 -2.3
Net domestic financing -2.8 2.2 3.2 5.0 3.6 2.3 1.2 0.8 -0.4 -1.4
Of which: short term debt (net) 0.9 1.5 1.3 1.0 3.0 -0.2 -0.4 0.5 -0.8 -0.2
Of which: issuances of medium term debt 2.4 5.3 3.7 4.2 1.8 4.0 4.2 5.1 2.8 1.9
o.w. SDR allocation 1.1
Of which: amortization of medium term debt -2.8 -3.0 -2.5 -1.0 -1.9 -1.3 -2.6 -4.7 -2.6 -2.4
Change in Deposits -3.3 -1.6 0.7 0.7 0.7 -0.2 0.0 -0.1 0.2 -0.7
Float from previous year³ -0.3 -0.4 -0.9 -0.8 -0.6 0.0 0.0 0.0 0.0 0.0
Float at the end of the year³ 0.5 1.0 0.9 0.7 0.0 0.0 0.0 0.0 0.0 0.0
Exceptional financing (external debt service) 4 0.6 0.6 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financing gap 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Memorandum items:
Primary balance after grants (excl. the one-off and 2019 capital gains tax
revenues) -2.1 -2.6 -2.0 -2.0 0.4 0.8 1.8 1.9 3.2 4.8
Domestic primary balance⁵ 6.7 -0.9 1.0 -2.5 0.6 1.8 3.0 3.1 4.7 5.9
Stock of Government Deposits 12.2 13.5 11.9 9.5 7.6 6.9 6.2 5.8 4.6 4.5

1
2
³ The float from previous year consists in other accounts payable, the float at the end of the year consistes in other account receivable.
4
Exceptional financing for the external debt service under negotiations.

Table 3. Mozambique: Monetary Survey, 2020–2028

9-Jun-23
(Billions of Meticais; unless otherwise indicated)
2020 2021 2022 2023 2024 2025 2026 2027 2028
Projections
Bank of Mozambique
Net foreign assets 250.7 158.2 121.8 121.3 136.3 167.6 214.0 266.8 397.9
(US$ billions) 3.3 2.5 1.9 1.9 2.0 2.3 2.9 3.4 5.0
Net international reserves 261.6 186.8 149.0 149.0 165.3 198.1 245.8 299.7 432.0
(US$ billions) 3.5 2.9 2.3 2.3 2.4 2.8 3.3 3.9 5.4
Net domestic assets -84.4 -15.7 21.6 145.2 154.9 156.8 149.9 150.2 79.0
Credit to government (net) -67.9 -72.6 -37.8 -22.4 -24.9 -25.0 -27.1 -22.6 -39.0
Credit to banks (net) -105.3 -81.0 -125.7 -96.5 -108.8 -139.7 -183.7 -240.5 -354.6
Credit to the economy 5.0 6.0 6.6 12.2 13.3 14.9 16.7 19.1 21.8
Other items (net; assets +) 83.8 131.9 178.5 251.9 275.2 306.6 343.9 394.1 450.8
Reserve money 166.3 142.5 143.4 266.5 291.2 324.4 363.9 417.0 476.9
Currency in circulation 68.7 72.7 80.7 85.6 93.3 104.5 116.0 132.2 150.7
Bank Deposits (reserves) in BM 97.6 69.7 62.6 180.9 197.9 219.9 247.9 284.8 326.2
Commercial Banks
(US$ billions) 0.8 1.3 1.3 1.3 1.3 1.4 1.4 1.8 2.2
Net domestic assets 468.5 454.2 501.7 529.4 574.2 638.2 703.5 794.1 897.0
Banks' reserves 114.5 87.0 84.5 199.3 218.0 242.4 272.9 313.2 358.6
Credit to central bank (net) 103.2 78.7 121.6 96.5 108.8 139.7 183.7 240.5 354.6
Credit to government (net) 128.1 174.9 175.4 169.5 168.9 168.2 167.6 167.0 166.5
Of which: in foreign currency 45.2 41.2 45.5 47.3 53.1 58.4 64.1 71.8 78.4
(billions of U.S. dollars) 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0
Other items (net; assets +) -131.6 -153.0 -156.7 -224.2 -244.6 -267.5 -311.2 -363.6 -460.3
Deposits 530.9 538.2 583.2 613.1 662.4 736.6 810.3 931.9 1,070.8
Demand and savings deposits 331.4 327.8 342.8 360.4 389.4 433.0 476.3 547.8 629.5
Time deposits 199.6 210.4 240.4 252.7 273.0 303.6 334.0 384.1 441.3
Monetary Survey
(US$ billions) 4.2 3.8 3.2 3.1 3.3 3.7 4.3 5.2 7.1
Net domestic assets 270.5 352.5 443.3 475.3 511.2 552.6 580.5 631.1 617.4
Domestic credit 319.4 375.0 421.1 447.6 480.6 513.4 547.8 600.6 626.9
Credit to government (net) 60.2 102.3 137.6 147.1 144.0 143.2 140.5 144.5 127.5
Of which: in foreign currency 45.2 41.2 45.5 49.3 55.3 60.8 66.9 74.9 82.0
Other items (net; assets +) -49.0 -22.5 22.2 27.7 30.6 39.1 32.7 30.5 -9.6
Money and quasi money (M3) 583.7 594.6 646.6 680.2 735.6 818.6 901.3 1,035.6 1,189.1
Foreign currency deposits 157.5 144.4 146.1 149.5 157.2 170.9 182.3 216.0 254.7
(US$ billions) 2.1 2.3 2.3 2.3 2.3 2.4 2.4 2.8 3.2
M2 426.2 450.3 500.5 530.7 578.4 647.7 719.0 819.6 934.4
Currency outside banks 52.7 56.4 63.3 67.2 73.2 82.0 91.0 103.7 118.3
Domestic currency deposits 373.5 393.9 437.2 463.5 505.2 565.8 628.0 715.9 816.1
Memorandum Items
12-month percent change
Reserve money 9.0 -14.3 0.6 85.9 9.3 11.4 12.2 14.6 14.4
M2 24.0 1.4 11.2 6.0 9.0 12.0 11.0 14.0 14.0
M3 23.3 1.9 8.7 5.2 8.1 11.3 10.1 14.9 14.8
Money multiplier (M2/reserve money) 2.56 3.16 3.49 1.99 1.99 2.00 1.98 1.97 1.96
Velocity (GDP/M2) 2.31 2.34 2.44 2.67 2.76 2.76 2.75 2.88 2.99
Nominal GDP 983 1,053 1,223 1,414 1,594 1,790 1,977 2,364 2,796
Nominal GDP growth 2.2 7.1 16.1 15.6 12.7 12.3 10.4 19.6 18.2
Sources: Bank of Mozambique (BM); and IMF staff estimates and projections.

Table 4a. Mozambique: Balance of Payments, 2019–28

(Millions of U.S. dollars; unless otherwise indicated)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
1st 1st 1st
Est. Est. Proj. Proj. Proj. Proj. Proj. Proj.
review review review
Current Account Balance -2,946 -3,900 -3,601 -7,408 -6,295 -2,895 -3,408 -7,779 -9,295 -11,053 -12,144 -9,558 -7,097
Trade balance for goods -2,084 -2,294 -2,252 -5,567 -5,056 -1,028 -1,570 -1,516 -2,857 -3,102 -3,276 -636 1,930
Of which: Megaprojects 1,874 1,730 3,238 420 725 4,764 5,214 4,354 3,984 3,908 3,884 6,799 9,707
Exports, f.o.b. 4,669 3,588 5,583 7,756 8,281 7,565 8,153 8,607 8,447 8,909 9,250 12,054 14,682
Megaprojects 3,278 2,504 4,032 5,982 6,172 5,639 6,205 6,593 6,364 6,618 6,740 9,306 11,615
Other 1,390 1,084 1,551 1,774 2,109 1,926 1,948 2,014 2,083 2,291 2,510 2,749 3,067
Imports, f.o.b. 6,753 5,883 7,834 13,323 13,337 8,593 9,723 10,123 11,304 12,011 12,526 12,690 12,752
Megaprojects 1,404 774 794 5,562 5,448 875 991 2,240 2,380 2,710 2,856 2,506 1,908
Other 5,348 5,109 7,040 7,761 7,890 7,718 8,732 7,883 8,924 9,300 9,671 10,184 10,844
Services (net) -1,831 -1,997 -1,736 -2,086 -1,447 -1,629 -1,296 -5,768 -5,349 -6,626 -7,123 -6,292 -4,799
Megaprojects -1,718 -1,632 -1,363 -1,580 -1,300 -1,056 -1,096 -5,153 -5,073 -6,267 -6,677 -5,625 -4,057
Other -112 -365 -372 -506 -147 -573 -201 -600 -266 -338 -415 -605 -649
Primary income (net) -276 -287 -340 -575 -924 -848 -1,707 -1,063 -2,138 -2,375 -2,852 -3,703 -5,375
Of which : Interest on public debt (net) 1 -216 -193 -161 -175 -181 -205 -212 -205 -250 -245 -252 -528 -256
Of which : Megaprojects (Net interest and dividends) 0 0 0 -187 -135 -348 -801 -551 -1,062 -1,218 -1,633 -2,158 -3,724
Secondary income (net) 1,245 678 726 821 1,132 610 1,165 568 1,049 1,050 1,108 1,072 1,147
Of which : External grants 79 250 209 491 392 278 428 224 274 243 271 205 246
0 0 0
Capital Account Balance 106 135 64.9 153 61 161 167 182 189 213 250 294 347
Financial Account Balance 4,671 3,848 2,538 6,562 5,977 2,764 3,195 7,845 9,240 11,184 12,420 9,846 8,274
Net foreign direct investment 3,410 3,035 5,102 3,055 1,975 1,490 936 2,900 3,266 3,987 4,399 2,471 3,309
Megaprojects 954 2,568 3,080 2,269 1,329 623 227 2,002 2,224 2,359 2,524 311 791
Other 2,456 466 2,022 785 647 868 708 898 1,042 1,628 1,875 2,160 2,518
Borrowing (net) by the general government 413 7 31 -92 -248 -93 -161 -92 -131 -96 -88 -360 -822
Disbursements 698 326 295 432 155 436 340 443 370 408 416 395 338
Repayments 2 284 319 264 523 403 529 501 535 502 504 504 755 1,160
Loans (net) by the nonfin private sector 904 889 -1,046 717 658 570 508 640 588 681 783 865 928
Megaprojects 0 0 0 0 0 0 0 0 0 0 0 0 0
Other 904 889 -1,046 717 658 570 508 640 588 681 783 865 928
Other financial flows (net) 3 -57 -82 -1,548 2,882 3,592 797 1,912 4,397 5,518 6,612 7,326 6,869 4,859
Of which: Megaproject trade credit (net) -3,708 -5,302 1,643 2,648 -2,126 -2,039 -2,054 -1,789 -2,198 -2,706 -2,277 -2,804
Of which: net SDR -1 6 300 0
0 -240 0
0 0 0
0 0 0 0 0 0
Net Errors and Omissions -1,026 102 399 0
0 -323 0
0 0 0
0 0 0 0 0 0
Overall Balance 804 184 -599 -693
0 -580 31
0 -46 248
0 135 344 526 581 1,524
Financing -804 -184 599 693 580 -31 46 -248 -135 -344 -526 -581 -1,524
Reserve assets (- = increase) -1,211 -726 405 564 424 -127 -50 -360 -245 -351 -441 -496 -1,432
Of which : SDR allocation (- = increase) 17 0 -305 0 259 0 0 0 0 0 0 0 0
Net use of credit 73 281 -26 129 124 97 96 112 111 7 -85 -86 -92
Of which : IMF disbursements/Financing gap (+) 118 309 0 155 150 123 122 124 122 61 0 0 0
Of which : Repayments to the IMF (-) -44 -28 -26 -26 -26 -26 -26 -11 -11 -54 -85 -86 -92
Exceptional financing 4 334 261 220 0 32 0 0 0 0 0 0 0 0
Of which : IMF CCRT grants 28 26
Memorandum items:
Current account balance (Percent of GDP) -19.1 -27.6 -22.4 -41 -32.9 -15 -15.5 -35 -38.9 -43.2 -44.9 -30.7 -20.0
excl. megaprojects (MP) (Percent of GDP) -25.0 -28.2 -34.1 -34 -29.5 -32 -30.7 -29 -29.8 -29.1 -28.4 -27.4 -25.1
5
excl. MP and indirect MP imports (Percent of GDP) -17.0 -18.2 -21.9 -16 -20.1 -19 -21.9 -17 -21.3 -20.6 -20.0 -19.7 -18.0
Net foreign assets 3,472 3,347 2,478 1,800 1,907 1,831 1,862 2,079 1,996 2,340 2,866 3,447 4,971
6
Net international reserves 3,605 3,493 2,927 2,234 2,333 2,265 2,288 2,512 2,422 2,766 3,292 3,873 5,397
Gross international reserves 3,884 4,070 3,470 2,905 2,888 3,031 2,939 3,389 3,184 3,536 3,977 4,464 5,896
Months of next year's imports of goods and services 5.4 4.7 2.6 3.1 2.9 2.1 2.0 2.2 1.9 2.0 2.4 2.6 3.7
Months of projected imports of G&S (under full debt service) 5.4 4.7 2.6 3.1 2.9 2.1 2.0 2.2 1.9 2.0 2.4 2.8 4.1
Months of next year's imports of goods and services, excl. MP 7.5 5.9 4.5 3.7 3.4 3.8 3.4 4.2 3.5 3.7 3.9 4.4 5.5
Percent of broad money (M2) 66.2 71.5 49.2 41 36.9 39 36.1 41 37.6 39.1 41.3 42.1 50.5
Sources: Data from Government of Mozambique and projections by IMF staff.

1
Includes interest payments for Ematum and previously undisclosed loans.
2
Includes repayments of previously undisclosed loans.
3
Other financial account flows include net portfolio investment; net financial derivatives; net currency and deposits; insurance, pension and standardized guarantee schemes (net); net
trade credits and advances; net other accounts receivable/payable; net other equity and net special drawing rights.
4
Exceptional financing consists of external debt service arrears on defaulted loans and IMF CCRT grants.
5
Imports by domestic firms to supply megaprojects (estimated).
6
NIR include USD reserve deposits of commercial banks at the Bank of Mozambique. NIR do not include any disbursements by the IMF, foreign currency swaps, foreign currency
liabilities of the central bank to non-residents, foreign currency deposits by resident banks, or reserve requirement deposits in foreign currency by resident banks.

Table 4b. Mozambique: Balance of Payments, 2019–28

(Percent of GDP)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
1st 1st 1st 1st 1st 1st
Est. Est. Proj. Proj. Proj. Proj. Proj. Proj.
review review review review review review
Current Account Balance -19.1 -27.6 -22.4 -41.5 -32.9 -14.7 -15.5 -35.5 -38.9 -38.9 -43.2 -40.9 -44.9 -27.1 -30.7 -20.0
Trade balance for goods -13.5 -16.2 -14.0 -31.2 -26.4 -5.2 -7.2 -6.9 -12.0 -6.8 -12.1 -7.5 -12.1 2.2 -2.0 5.4
Of which: Megaprojects 12.2 12.2 20.1 2.4 3.8 24.1 23.8 19.9 16.7 18.4 15.3 17.0 14.4 23.9 21.9 27.3
Exports, f.o.b. 30.3 25.3 34.7 43.4 43.2 38.3 37.2 39.3 35.3 38.8 34.8 37.2 34.2 40.6 38.8 41.3
Megaprojects 21.3 17.7 25.1 33.5 32.2 28.6 28.3 30.1 26.6 29.7 25.9 28.1 24.9 32.2 29.9 32.7
Other 9.0 7.7 9.6 9.9 11.0 9.8 8.9 9.2 8.7 9.0 8.9 9.0 9.3 8.4 8.8 8.6
Imports, f.o.b. 43.9 41.6 48.7 74.6 69.6 43.5 44.3 46.2 47.3 45.5 46.9 44.6 46.3 38.4 40.8 35.9
Megaprojects 9.1 5.5 4.9 31.2 28.4 4.4 4.5 10.2 10.0 11.3 10.6 11.1 10.6 8.3 8.1 5.4
Other 34.8 36.1 43.8 43.5 41.2 39.1 39.8 36.0 37.3 34.2 36.3 33.5 35.8 30.1 32.8 30.5
Services (net) -11.9 -14.1 -10.8 -11.7 -7.6 -8.3 -5.9 -26.3 -22.4 -29.9 -25.9 -30.1 -26.4 -23.0 -20.2 -13.5
Megaprojects -11.2 -11.5 -8.5 -8.9 -6.8 -5.4 -5.0 -23.5 -21.2 -27.1 -24.5 -27.0 -24.7 -19.6 -18.1 -11.4
Other -0.7 -2.6 -2.3 -2.8 -0.8 -2.9 -0.9 -2.7 -1.1 -2.7 -1.3 -2.9 -1.5 -3.2 -1.9 -1.8
Primary income (net) -1.8 -2.0 -2.1 -3.2 -4.8 -4.3 -7.8 -4.8 -8.9 -4.4 -9.3 -5.5 -10.6 -8.3 -11.9 -15.1
Of which: Interest on public debt (net)
1
-1.4 -1.4 -1.0 -1.0 -0.9 -1.0 -1.0 -0.9 -1.0 -0.9 -1.0 -1.0 -0.9 -1.8 -1.7 -0.7
Of which: Megaprojects (net Interest and dividends) 0.0 0.0 0.0 -1.0 -0.7 -1.8 -3.7 -2.5 -4.4 -2.2 -4.8 -3.2 -6.0 -5.1 -6.9 -10.5
Secondary income (net) 8.1 4.8 4.5 4.6 5.9 3.1 5.3 2.6 4.4 2.1 4.1 2.2 4.1 2.0 3.4 3.2
Of which: External grants 0.5 1.8 1.3 2.8 2.0 1.4 2.0 1.0 1.1 0.6 0.9 0.7 1.0 0.7 0.7 0.7
Capital Account Balance 0.7 1.0 0.4 0.9 0.3 0.8 0.8 0.8 0.8 0.9 0.8 1.0 0.9 1.0 0.9 1.0
Financial Account Balance 30.3 27.2 15.8 36.8 31.2 14.0 14.6 35.8 38.7 39.3 43.7 43.3 45.9 27.8 31.7 23.3
Net foreign direct investment 22.2 21.4 31.7 17.1 10.3 7.6 4.3 13.2 13.7 13.3 15.6 12.4 16.3 4.1 7.9 9.3
Megaprojects 6.2 18.1 19.1 12.7 6.9 3.2 1.0 9.1 9.3 9.3 9.2 9.3 9.3 1.1 1.0 2.2
Other 16.0 3.3 12.6 4.4 3.4 4.4 3.2 4.1 4.4 4.0 6.4 3.1 6.9 3.0 6.9 7.1
Borrowing (net) by the general government 2.7 0.0 0.2 -0.5 -1.3 -0.5 -0.7 -0.4 -0.5 -0.3 -0.4 -0.4 -0.3 -1.4 -1.2 -2.3
Disbursements 4.5 2.3 1.8 2.4 0.8 2.2 1.6 2.0 1.5 1.9 1.6 1.8 1.5 1.2 1.3 1.0
Repayments 2
1.8 2.3 1.6 2.9 2.1 2.7 2.3 2.4 2.1 2.3 2.0 2.1 1.9 2.6 2.4 3.3
Loans (net) by the nonfin private sector 5.9 6.3 -6.5 4.0 3.4 2.9 2.3 2.9 2.5 3.1 2.7 3.3 2.9 3.1 2.8 2.6
Megaprojects 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other 5.9 6.3 -6.5 4.0 3.4 2.9 2.3 2.9 2.5 3.1 2.7 3.3 2.9 3.1 2.8 2.6
Other financial flows (net) 3 -0.4 -0.6 -9.6 16.1 18.7 4.0 8.7 20.1 23.1 23.2 25.8 27.9 27.1 22.1 22.1 13.7
Net Errors and Omissions -6.7 0.7 2.5 0.0 -1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Overall Balance 5.2 1.3 -3.7 -3.9 -3.0 0.2 -0.2 1.1 0.6 1.2 1.3 3.4 1.9 1.6 1.9 4.3
Financing -5.2 -1.3 3.7 3.9 3.0 -0.2 0.2 -1.1 -0.6 -1.2 -1.3 -3.4 -1.9 -1.6 -1.9 -4.3
Reserve assets (- = increase) -7.9 -5.1 2.5 3.2 2.2 -0.6 -0.2 -1.6 -1.0 -1.3 -1.4 -3.1 -1.6 -1.4 -1.6 -4.0
Net use of credit 0.5 2.0 -0.2 0.7 0.6 0.5 0.4 0.5 0.5 0.0 0.0 -0.3 -0.3 -0.3 -0.3 -0.3
Of which: IMF disbursements/Financing gap (+) 0.8 2.2 0.0 0.9 0.8 0.6 0.6 0.6 0.5 0.3 0.2 0.0 0.0 0.0 0.0 0.0
Of which: Repayments to the IMF (-) -0.3 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 0.0 -0.2 -0.2 -0.3 -0.3 -0.3 -0.3 -0.3
Exceptional financing 4
2.2 1.8 1.4 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Of which : IMF CCRT grants 0.0 0.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Sources: Data from Government of Mozambique and projections by IMF staff.

1
Includes interest payments for Ematum and previously undisclosed loans.
2
Includes repayments of previously undisclosed loans.
3
Other financial account flows include net portfolio investment; net financial derivatives; net currency and deposits; insurance, pension and standardized guarantee schemes (net); net trade credits and
advances; net other accounts receivable/payable; net other equity and net special drawing rights.
4
Exceptional financing consists of external debt service arrears on defaulted loans and IMF CCRT grants. The CCRT grant for the debt service falling due in the 12 months from April 14, 2021 is subject to the
availability of resources under the CCRT.

Table 5. Mozambique: External Financing Needs and Sources, 2021–28

(Millions of U.S. dollars; unless otherwise indicated)
2021 2022 2023 2024 2025 2026 2027 2028
Prel. Prel. Proj.
Financing Requirements 4,100 7,116 4,363 10,082 11,854 13,004 10,604 8,595
Current account deficit excl. grants 3,810 6,687 3,836 9,569 11,296 12,415 9,763 7,343
of which: Megaprojects -1,874 712 -3,315 2,153 3,580 4,428 986 -1,916
1/
of which: Public sector interest payments 161 181 212 250 245 252 528 256
Public sector loan amortization 264 403 501 502 504 504 755 1,160
Interest and amortization payments on existing Fund loans 26 26 26 11 54 85 86 92
Financing Sources 4,074 6,639 3,941 9,809 11,692 12,904 10,604 8,595
Capital account balance 65 61 167 189 213 250 294 347
Net foreign direct investment 5,102 1,975 936 3,266 3,987 4,399 2,471 3,309
of which: Megaprojects 3,080 1,329 227 2,224 2,359 2,524 311 791
Public sector loan disbursements 295 155 340 370 408 416 395 338
Public sector grants 209 64 128 124 142 171 205 246
Non-financial private sector loans (net) -1,046 658 508 588 681 783 865 928
of which: Megaprojects 0 0 0 0 0 0 0 0
Other capital flows (net) -1,149 3,269 1,912 5,518 6,612 7,326 6,869 4,859
Change in reserves (+ decrease) 405 424 -50 -245 -351 -441 -496 -1,432
2/
Exceptional financing 193 32 0 0 0 0 0 0
Financing Gap 26 478 422 272 161 100 0 0

CCRT 26 0 0 0 0 0 0 0
Public sector program grants 0 328 300 150 100 100 0 0
of which: World Bank 0 285 300 150 100 100 0 0
of which: EU 0 43 0 0 0 0 0 0
Financing from IMF (RCF/ECF disbursement) 0 150 122 122 61 0 0 0
Sources: Mozambican authorities and IMF staff estimates and projections.
1
Includes payments on EMATUM bond but excludes interest on Fund loans.
2
Exceptional financing consists of external debt service arrears on defaulted loans.

Table 6. Mozambique: Financial Soundness Indicators for Banking Sector1/, 2019–23
(In percent; unless otherwise indicated)
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23
Capital Adequacy
Regulatory capital to risk-weighted assets 23.5 24.0 26.2 28.8 25.2 25.2 26.5 26.1 26.2 25.6 27.9 26.2 25.5 26.8 26.7 26.9 25.1
Regulatory Tier I capital to risk-weighted assets 22.4 22.9 25.8 28.7 25.1 25.4 27.0 27.2 27.2 26.6 28.5 26.7 26.0 27.3 27.2 27.5 25.6
Capital (net worth) to assets 11.4 11.4 12.3 12.7 11.5 11.4 12.1 11.8 11.9 11.6 12.9 12.9 11.9 12.5 13.0 12.5 12.3
Tier 1 Capital to total Assets 10.9 10.9 12.1 12.6 11.5 11.5 12.3 12.3 12.3 12.0 13.1 13.1 12.1 12.8 13.2 12.8 12.5
Asset Quality
Nonperforming loans to gross loans ¹ 11.5 10.6 10.1 10.2 10.3 12.6 11.8 9.8 9.8 9.9 9.8 10.2 9.2 10.0 9.3 9.0 10.4
Total provision to NPLs 99.5 96.2 103.2 93.5 84.5 78.4 82.5 78.3 81.0 80.8 77.9 73.7 75.5 73.1 79.6 77.1 75.9
NPLs net of provisions to total capital 2.9 3.6 2.9 3.9 4.4 12.2 9.6 9.7 8.7 8.9 8.5 9.9 9.4 10.6 8.9 8.5 9.1
NPLs net of provisions to capital and reserves 1.8 2.2 1.9 2.6 2.8 7.7 6.3 6.6 5.9 5.8 5.9 6.8 6.5 7.7 6.4 5.8 6.2
Specific provisions to NPLs 93.4 90.9 91.8 88.7 89.0 75.0 78.8 74.1 76.4 75.3 73.3 68.5 70.7 68.0 72.0 71.8 71.6
Earnings and Profitability
Return on Equity 33.7 27.3 26.7 24.9 25.5 20.2 20.1 18.7 24.3 24.6 23.1 17.5 18.3 18.2 17.8 19.1 22.1
Return on Assets 3.7 3.1 3.1 3.0 3.0 2.4 2.4 2.2 2.9 2.9 2.8 3.9 4.5 4.5 4.4 4.7 5.5
Interest margin to gross income 64.8 68.3 67.9 67.6 66.8 68.5 67.2 65.9 66.2 64.9 66.6 64.1 66.8 67.1 68.0 68.5 70.5
Noninterest expenses to gross income 54.0 59.0 58.3 59.2 62.1 62.5 62.6 62.1 60.2 57.1 57.8 53.7 53.6 53.3 53.7 53.9 50.9
Personnel expenses to noninterest expenses 44.9 45.6 45.6 45.2 44.2 44.3 45.7 45.9 43.6 44.3 44.0 44.5 44.4 43.7 44.4 43.7 43.0
Trading and fee income to gross income 16.7 11.5 11.1 11.1 11.9 11.3 11.6 12.0 13.3 13.5 12.7 14.9 11.5 11.1 10.9 10.8 10.0
Fee and commission to total income 17.7 19.9 20.9 21.4 21.5 20.5 20.5 21.2 22.5 22.1 22.6 21.7 21.9 21.8 21.6 21.4 19.9
Liquidity
Liquid assets (core) to total assets 11.9 11.8 13.2 14.3 12.1 11.6 12.5 13.8 13.2 11.9 12.0 18.1 16.9 16.4 16.4 15.4 10.6
Liquid assets (broad measure) to total assets 37.2 37.5 39.8 39.3 40.7 40.5 40.6 42.5 43.6 41.2 41.7 47.9 49.2 48.6 53.1 50.5 38.0
Liquid assets (core) to total deposits 17.4 17.4 19.4 20.7 17.5 16.5 17.7 19.1 18.6 16.9 17.1 25.5 23.8 23.1 23.3 21.1 14.8
Liquid assets (core) to demand deposits 27.8 28.1 31.7 33.3 27.6 26.7 29.2 30.6 30.4 26.6 27.9 42.0 40.8 39.5 40.4 35.2 26.3
Liquid assets (core) to short term liabilities 17.0 17.4 19.1 20.4 17.2 16.5 17.3 19.0 17.9 16.5 16.7 25.7 24.5 23.3 22.0 21.3 14.8
Liquid assets (broad measure) to short term liabilities 53.0 55.4 57.3 56.1 57.8 57.8 56.0 58.5 59.0 56.9 58.4 68.3 71.5 68.8 71.0 69.8 53.2
INTERNATIONAL MONETARY FUND
Customer deposits to total (noninterbank) loans 170.4 173.8 177.1 182.7 186.4 186.4 186.1 204.3 203.8 195.8 192.8 199.1 208.8 208.0 193.8 212.4 209.4
Sensitivity to Market Risk
FX loans to FX deposits 1/ 49.4 48.8 52.3 47.8 47.1 46.2 48.5 37.1 43.5 42.3 42.6 34.1 36.2 35.9 36.1 33.5 34.0
FX loans to total loans 22.2 21.1 21.3 19.9 20.9 21.1 20.5 16.9 18.1 18.0 18.2 15.6 16.8 17.0 14.4 14.5 16.3
FX liabilities to total liabilities 25.3 23.9 22.9 23.4 25.3 26.3 25.4 26.2 23.8 23.2 23.1 23.6 24.1 25.0 23.0 23.3 23.0
Source: Bank of Mozambique (BM).

1/ Includes deposits at parent banks.
31

Table 7. Mozambique: Risk Assessment Matrix1/

Source of Risks Likelihood Horizon Impact Policy Response
Commodity price volatility. A succession of Medium High Well-targeted subsidies for the needy and
supply disruptions (e.g., due to conflicts and users of goods subject to higher prices.
export restrictions) and demand fluctuations
(e.g., reflecting China reopening) causes
recurrent commodity price volatility, external and
fiscal pressures, and social and economic
instability.
Extreme climate events. Extreme climate events Medium ST, MT High Address infrastructure gaps.
cause more severe than expected damage to • Develop social safety nets.
infrastructure and loss of human lives and • Investment (public and private) in climate
livelihoods, amplifying supply chain disruptions resilient infrastructure and agriculture.
and inflationary pressures, causing water and • Strengthen institutions to manage
food shortages, and reducing growth. climate change risk.
Social discontent. Supply shocks, high inflation, High High • Well-targeted subsidies for the needy
real wage drops, and spillovers from crises in and users of goods subject to higher
other countries worsen inequality, trigger social prices.
unrest, and give rise to financing pressures and
damaging populist policies with possible
spillovers to other EMDEs. This exacerbates
imbalances, slows growth, and triggers market
repricing.
Deepening geo-economic fragmentation. High High Strengthen social safety nets.
Broader and deeper conflict(s) and weakened • Improve governance, transparency and
international cooperation lead to a more rapid accountability; fight corruption.
reconfiguration of trade and FDI, supply •Avoid early withdrawal of financial
disruptions, technological and payments systems support to households and companies.
fragmentation, rising input costs, financial • Anchor macroeconomic stability to
instability, a fracturing of international monetary mobilize private investment, through
and financial systems, and lower potential appropriate fiscal and monetary policy and
growth. structural reforms.
• Diversify exports products and partners.
• Improving the business environment to
boost productivity and competitiveness.
Deterioration in security situation in High ST, MT High • Enhance security and socioeconomic
Mozambique. policies in northern region.
• Continue drive for durable peace and
implementation of reforms.
Abrupt growth slowdown in China: Greater- Medium ST, MT Medium
than-expected economic disruptions from
COVID resurgence, rising geopolitical tensions,
and/or a sharper-than-expected slowdown in the
property sector disrupt economic activity.
Monetary policy miscalibration. Amid high Medium Medium
economic uncertainty and volatility, major
central banks pivot to loosen monetary policy
stance prematurely, de-anchoring inflation
expectations and triggering a wage-price spiral
in tight labor markets.
1
The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff).
The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent,
“medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks
and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. The
conjunctural shocks and scenario highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline. Structural
risks are those that are likely to remain salient over a longer horizon.

Table 7. Mozambique: Risk Assessment Matrix (concluded)
Source of Risks Likelihood Horizon Impact Policy Response

Fiscal risks materialize (contingent liabilities High ST, MT High • Strengthening cash management and
from SOEs, revenue shortfalls, expenditure commitment controls.
overruns). • Restructuring SOEs in financial distress.
• Adoption of a reliable medium-term
fiscal framework.
Systemic financial instability. Sharp swings in Medium High • Strengthen the resolution and crisis
real interest rates, risk premia, and assets management frameworks.
repricing amid economic slowdowns and policy • Enhance regulation and supervision.
shifts trigger insolvencies in countries with weak
banks or non-bank financial institutions, causing
markets dislocations and adverse cross-border
spillovers.
Delay in implementation of LNG investments. Medium MT High • Structural reform to support economic
diversification and inclusive growth.

Table 8. Mozambique: Indicators of Capacity to Repay the Fund

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Fund Obligations Based on Existing Credit
(in millions of SDRs)
Principal 18.930 8.520 39.760 62.480 69.300 85.200 76.680 45.440 22.720 15.900 0.000
Charges and interest 5.820 11.590 11.580 11.590 11.590 11.590 11.580 11.590 11.590 11.590 11.580
Obligations to the Fund Based on Existing and Prospective Credit1

(in millions of SDRs)
Principal 18.930 8.520 39.760 62.480 69.300 89.740 99.400 86.340 68.160 61.350 40.900
Charges and interest 8.220 11.270 11.260 11.270 11.270 11.270 11.260 11.270 11.270 11.270 11.260
Obligations to the Fund from Existing and Prospective Credit

In millions of U.S. dollars 33.008 26.804 68.706 99.535 109.087 131.038 119.490 77.209 46.450 37.217 15.677
In percent of gross international reserves 1.143 0.944 2.226 2.893 2.827 2.994 2.055 1.115 0.648 0.551 0.224
In percent of exports of goods and services 0.399 0.328 0.812 1.115 1.186 1.094 0.818 0.479 0.240 0.175 0.071
In percent of GDP 0.172 0.122 0.288 0.390 0.404 0.422 0.337 0.198 0.104 0.077 0.031
In percent of quota 10.893 8.851 22.597 32.601 35.603 42.601 38.847 25.101 15.101 12.099 5.074
Outstanding Fund Credit Based on Existing Drawings (end-of-period)

In millions of SDRs 426.000 417.480 377.720 315.240 245.940 160.740 84.060 38.620 15.900 0.000 0.000
Outstanding Fund Credit based on Existing and Prospective Drawings (end-of-period)

In millions of SDRs 516.890 599.260 604.940 542.460 473.160 383.420 284.020 197.680 129.510 68.170 27.270
In millions of U.S. dollars 689.351 798.728 809.561 728.954 638.097 519.088 384.516 267.626 175.335 92.291 36.919
In percent of gross international reserves 23.866 28.118 26.224 21.187 16.537 11.862 6.615 3.865 2.448 1.366 0.527
In percent of exports of goods and services 8.325 9.778 9.566 8.169 6.937 4.332 2.633 1.659 0.908 0.434 0.168
In percent of GDP 3.599 3.649 3.393 2.853 2.365 1.671 1.083 0.685 0.394 0.190 0.073
Use of IMF Credit

Net Use of IMF Credit (in millions of SDRs) 71.940 82.360 5.680 -62.480 -69.300 -89.740 -99.390 -86.330 -68.160 -61.350 -40.900
Disbursements (in millions of SDRs) 90.880 90.880 45.440 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Repayments (in millions of SDRs) 18.940 8.520 39.760 62.480 69.300 89.740 99.390 86.330 68.160 61.350 40.900
Memorandum Items:
Nominal GDP (in billions of U.S. dollars) 19.157 21.891 23.858 25.547 26.986 31.072 35.489 39.054 44.510 48.471 50.840
Exports of goods and services (in billions of U.S. dollars) 8.281 8.169 8.462 8.923 9.199 11.981 14.604 16.135 19.320 21.290 21.934
Gross international reserves (in billions of U.S. dollars) 2.888 2.841 3.087 3.441 3.859 4.376 5.813 6.924 7.163 6.754 7.000
Quota (in millions of SDRs) 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2 228.2
Sources: IMF staff estimates, and projections.
1
Assumes access of 50 of the quota in 2022, 40 in 2023, 40 in 2024, and 20 in 2025, and semi-annual disbursements from 2022.

Table 9. Mozambique: Schedule of Disbursements Under the ECF Arrangement, 2022–25

Amount Amount Available Date Conditions for Disbursement
(Percent of Quota) (Million SDR)
30.0 68.16 May 9, 2022 Executive Board approval of the three year ECF arrangement
Observance of the performance criteria for June 30, 2022 and completion of the first review
20.0 45.44 September 15, 2022
under the arrangement
Observance of the performance criteria for December 31, 2022 and completion of the
20.0 45.44 March 15, 2023
second review under the arrangement
Observance of the performance criteria for June 30, 2023 and completion of the third
20.0 45.44 September 15, 2023
review under the arrangement
Observance of the performance criteria for December 31, 2023 and completion of the
20.0 45.44 March 15, 2024
fourth review under the arrangement
Observance of the performance criteria for June 30, 2024 and completion of the fifth review
20.0 45.44 September 15, 2024
under the arrangement
Observance of the performance criteria for December 31, 2024 and completion of the sixth
20.0 45.44 March 15, 2025
review under the arrangement
Total 150.0 340.8

Source: IMF Staff estimates and projections.

Table 10. Mozambique: Composition of Public Debt and Debt Service by Creditor, 2022–241
Debt Stock (end of period) Debt Service
2022 2022 2023 2024 2022 2023 2024
(In million US$) (Percent total debt) (Percent GDP) (In million US$) (Percent GDP)
Total 18016.7 100.0 94.1 1190.8 2268.4 1551.1 7.2 11.8 7.1
External 2 13610.1 75.5 71.1 430.8 562.7 738.9 2.6 2.9 3.4
Multilateral creditors3 5039.5 28.0 26.3 163.8 166.0 224.7 1.0 0.9 1.0
IMF 592.0 3.3 3.1
World Bank 3016.9 16.7 15.8
ADF 886.2 4.9 4.6
Other Multilaterals 544.4 3.0 2.8
o/w : IDB 160.4 0.9 0.8
IFAD 130.0 0.7 0.7
BADEA 87.8 0.5 0.5
EBI 86.5 0.5 0.5
Bilateral Creditors 4288.6 23.8 22.4 222.2 351.9 410.9 1.3 1.8 1.9
Paris Club 1148.8 6.4 6.0 35.7 54.3 64.5 0.2 0.3 0.3
o/w: Japan 399.7 2.2 2.1
Korea 245.3 1.4 1.3
Brazil 193.2 1.1 1.0
France 148.2 0.8 0.8
Non-Paris Club 3139.7 17.4 16.4 186.5 297.6 346.4 1.1 1.6 1.6
o/w: China 1717.6 9.5 9.0
Portugal 485.5 2.7 2.5
Libya 253.4 1.4 1.3
India 241.4 1.3 1.3
Iraq 230.6 1.3 1.2
Bonds 900.0 5.0 4.7 44.9 44.9 45.0 0.3 0.2 0.2
Commercial creditors 50.5 0.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0
o/w: Senior creditors of LNG debt financing 43.0 0.2 0.2
Other international creditors 3331.5 18.5 17.4 0 46.5 22.8 0.0 0.2 0.1
o/w: ENH's LNG project partners4 3331.5 18.5 17.4
Domestic5 4406.6 24.5 23.0 760 1706 812 4.6 8.9 3.7
Held by residents, total
Held by non-residents, total
T-Bills 1094.0 6.1 5.7
Bonds 2254.5 12.5 11.8
Loans 1058.2 5.9 5.5
Memo Items:
Collateralized debt6 0 0.0
o/w: Related 0 0.0
o/w: Unrelated 0 0.0
Contingent liabilities 43.0 0.2 0.2
o/w: Public guarantees 43.0 0.2 0.3
Nominal GDP (millions US$) eop exchange rate 16082 18969 21426
1
As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA, except
the stock of domestic debt does not include state-owned enterprise equivalent to 1.4 percent of GDP.
2
External debt data are IMF estimates.
3
Multilateral creditors” are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF
policies (e.g. Lending Into Arrears)
4
Annual interest due are capitalized until beginning of project production.
5
Debt service in 2021 does not include amortization of T-bills.
6
Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on
the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a
lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing
to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for
Public Lenders and Borrowers” for a discussion of issues raised by collateral.

Annex I. Country Engagement Strategy

State fragility in Mozambique is manifested in conflict, poor economic and social outcomes, and
broad-based exclusion and marginalization of groups. Fragility has deep roots across several
dimensions—distributional, regional, historical, and in governance – and is linked to the unfinished
process of state building. Three decades of armed conflict, including the war for independence
(ending in 1975) and a subsequent armed internal conflict (coming to an end in 1992), created the
backdrop of the security challenges experienced today. While the authorities have prioritized
reforms addressing the causes and symptoms of fragility over many years, vested interests, shocks,
and capacity constraints have impeded steady progress. More effort is needed to reduce the
significant regional imbalances between North/Centre and South. The IMF has been closely
engaged with the country since the 1980s.
Conflict, Conflict Drivers, and Sources of Fragility
1. Stakeholders generally Figure AI.1. Mozambique: Human Displacement and

share a view of the key Food Insecurity in Northern Mozambique
(As of March 2023)
components of Mozambique’s
fragility. These include a legacy
of conflict, uneven regional
development, high fertility rates,
fast but unequal growth, heavy
reliance on Overseas
Development Assistance, an
unequal division of the “peace
dividend”, and high vulnerability
to extreme weather conditions.
This Country Engagement
Strategy (CES) is broadly in line
with the World Bank’s RRA
assessment, with more emphasis
on institutional and fiscal
management weaknesses.
2. Armed conflict and

a high number of internally
displaced people (IDPs) are an
outcome of fragility,
particularly in the north of the
Source: UNOCHA
country (Figure 1). The province
of Cabo Delgado has been especially impacted by poor infrastructure, lack of schooling and
basic health care, and weak law enforcement. Deficient coastal patrolling has created
opportunities for illicit trade, including of precious minerals, timber, as well as drugs. Natural
resource exploitation—including investment in large natural gas reserves—has not delivered
material improvement in economic and living conditions for the local population, and discontent

has fostered radicalism among unemployed local youth. Recurrent waves of violence started in
2017 and led to over 4,500 deaths and a peak in IDPs estimated at over 900,000 in 2021. The IDP
count has been gradually declining as the state regains control of the territory with support from
Rwandan and South African Development Community military forces, and as of end-April 2023,
about 420,000 people have returned to their places of origin.
3. Fragility and vulnerability are exacerbated by widespread poverty and food

insecurity. Figure 2 presents the Global Food Security Index for 2022, which measures several
dimensions of food insecurity
Figure AI.2. Mozambique: Food Insecurity Index
including affordability,
availability, quality and safety,
and natural resources and
resilience. For all indicators
Mozambique ranks at the low
end of the distribution. This is
driven by climate change and its
impacts on subsistence
agriculture, uneven distribution
of growth, limited diversification,
governance weaknesses across
institutions, illicit trade and
informality, and low human
capital. Source: Global Food Security Index, 2022, The Economist. IMF Staff
computations.
Constraints to Reform Implementation
4. Institutions and governance are weak. Mozambique’s Worldwide Governance

Indicators (WGI) scores
deteriorated over the last Figure AI.3. Mozambique: World Governance Indicators
two decades in all 6
governance dimensions,
including rule of law,
political stability and
absence of conflict, control
of corruption, regulatory
quality, voice and
accountability, and
government effectiveness.
Moreover, Mozambique’s Source: World Bank
Rank: Percentile rank among all countries (ranges from 0 (lowest) to 100 (highest)
rank scored below Sub-
rank)
Saharan Africa’s average in

2021 in all the governance dimensions. 1 Limited state capacity and lack of independence from
private interests weaken institutions. Furthermore, corruption is a key component of high
transaction costs for the private sector. The authorities recognized the importance of addressing
the issues and published a Diagnostic Report on Transparency, Governance and Corruption in
2019, but progress has been limited. Furthermore, indicators such as the WGI reflect survey
collected data and stakeholders’ perception, they do not necessarily reflect ongoing institutional
change in real time. It is important to note that important reform effort and successful
implementation has been happening in the areas of Public Financial Management, AML/CFT,
financial market supervision, among others. Those reforms, while very impactful in determining
the efficiency, transparency, and rules-based policy making, are not necessarily reflected
immediately in the public opinion.
Policies to Promote Inclusive Growth and Resilience
5. Macroeconomic stability is necessary for sustained and inclusive economic growth.

The government should keep fiscal discipline to reduce public debt vulnerabilities, while ensuring
that spending is well targeted and economic recovery protected. This will reduce interest rates
and create fiscal space to have stronger safety nets and invest in health, education, and climate
resilient infrastructure. Developing sound fiscal frameworks and institutions to adequately
manage natural resource wealth, improving the business environment, and strengthening
governance are necessary to promote private sector development, generate jobs for a young and
rapidly-growing population, and raise living standards.
6. Addressing public financial management (PFM) weaknesses is essential to

strengthen the current fiscal framework and improve the quality of government spending.
Improving the annual budget process by having a binding expenditure ceiling, tightening
expenditure controls, and enhancing fiscal reporting and transparency is critical. In addition,
government officials would benefit from enhancing their capacity in policy formulation,
implementation, and monitoring.
Sequence of CD Priorities & Prioritization of Policy Advice
7. Mozambique is a high-intensity user of Fund capacity development (CD). The country

is among the top decile of IMF CD recipients, and also receives CD support from many other
development partners. CD covers all key areas of institution building, with a focus on (1)
governance, transparency, and accountability; (2) PFM broadly defined, including revenue
administration, public debt and investment management and fiscal risks; (3) expenditure policies;
(4) natural resource wealth management; (5) central banking operations and governance; (6)
government, real, and financial sector statistics; and (7) climate adaptation. Fund CD activities
1 World Bank. (2022, February 16). Worldwide Governance Indicators. Retrieved from
https://info.worldbank.org/governance/wgi/ D. Kaufmann, A. Kraay, and M. Mastruzzi, Worldwide Governance
Indicators (WGI), available at http://www.govindicators.org/.
The WGI are a research dataset summarizing the views on the quality of governance provided by many
enterprise, citizen, and expert survey respondents. The WGI are perception-based indicators and as such subject
to bias, and do not reflect the official views of the IMF.

respond to specific requests from the authorities and are in line with the reform priorities
identified in the National Development Strategy (ENDE), the five-year government plan (PQG),
the government economic acceleration plan, the Diagnostic Report on Transparency, Governance
and Corruption and Fund staff advice.
8. The Fund-supported program underscores several reforms to strengthen

institutions. The ECF approved in 2022 focuses on three broad areas of institutional reform: (i)
governance and anti-corruption, (ii) LNG revenue management, and (iii) fiscal management,
particularly PFM reform. In the first area, an upgraded AML/CFT framework and a stronger public
probity law is envisaged. In the second area, the goal is a Sovereign Wealth Fund (SWF) law in
line with the Santiago Principles that supports transparent and sound management of natural
resource wealth. In the third area, the program includes measures to enhance domestic revenue
mobilization and strengthen the efficiency of public spending.

Annex II. Consultation with the IMF Executive Board on the

Missed Inflation Target under the MPCC
Consultation on Breach of MPCC Target in December 2022.
Banco de Moçambique
June 15, 2023
In December 2022, CPI inflation was 10.3 percent (y/y), 1.2 percentage points below the
lower bound of the inflation consultation band (12.0 percent – 15.0 percent) agreed under the
ECF. This letter firstly explains the reasons why inflation breached the lower limit of the inflation
consultation band and then discusses the policy response and the inflation outlook.
1. Inflation deviation from the consultation band

In the fourth quarter of 2022, inflation decelerated, driven by external and domestic
factors, despite the context of recovering aggregate demand following the COVID crisis. In
particular, international food and energy prices, which had increased earlier in the year due to
the war in Ukraine, began to ease significantly. Moreover, the impact on inflation of a pick-up in
the domestic economy was relatively contained, despite a rebound in economic activity across a
broad range of sectors.
As an oil importer, Mozambique has been directly affected by the easing in global oil
prices. Compared to forecasts (on which the MPCC bands were based), fuel price inflation was
significantly lower than expected, as the government decided to keep fuel prices constant at the
pump throughout the second half of 2022. With a weight of 7 percent in the CPI basket, diesel
and gasoline price developments by themselves led to a shortfall in inflation of about
1 percentage point compared to the forecast. This in turn contributed to lower-than-expected
second-round effects on other transport prices, such as public transportation fares; this also
contributed about 1 percentage point less than expected to headline inflation. Similarly, the
easing of global food prices has had a moderating effect on inflation. The price of wheat flour
and wheat bread increased by 4.5 percent and 2.1 percent, respectively, in the second half of
2022, significantly below the increases of 13.0 percent and 32.9 percent over the first half of
2022, and below the increases forecast when the MPCC was set. With a total CPI basket weight of
wheat-derived products of 4.3 percent, this moderation led to a further easing in headline
inflation compared to forecasts.
The re-opening of the Mozambican economy following COVID has only led to moderate
price pressures, amid tight monetary policy. The contribution to inflation of items other than
food and transportation fell from 2.6 percentage points in July 2022 to 1.6 percentage points by
December 2022. This moderation in domestic price pressures despite a rebounding in economic

activity further increased the undershooting of headline inflation compared to the MPCC bands
and forecasts.
2. Policy response
In March 2022, when inflation was still below the target, the BM reacted to an increase in
expected inflation and gathering economic momentum following the lifting of COVID-related
restrictions by increasing the policy rate (MIMO) by 200bp, from 13.25 percent to 15.25 percent.
A second 200bp increase was implemented in September 2022. In doing so, the BM’s policy
aimed to proactively forestall risks of de-anchoring inflation expectations. Since January 2021,
the BM has cumulatively increased the policy rate by 700bp, and real interest rates are among
the highest in the region. This monetary policy tightening effectively contained inflation and
guided it towards the BM’s medium-term inflation objective somewhat faster than anticipated.
3. Inflation outlook
In March 2023, headline inflation was 9.3 percent year-on-year. Inflation for the CPI
excluding fruit, vegetables and administered prices, remained substantially lower at 4.2 percent
year-on-year. The current baseline scenario is predicated on an expected further moderation in
international food and fuel prices in 2023. Meanwhile, while the increase in food and fuel prices
to date will have second-round effects that add inflationary pressure, the relatively tight policy
stance is expected to sufficiently lower demand and guide expectations to set overall inflation on
a path towards the medium-term objectives. Inflation is expected to decelerate to 6.7 percent at
the end of 2023, 6.5 percent at end-2024, and 5.7 percent at end-2025.
Given remaining uncertainties around the war in Ukraine, the global and domestic
economic outlook and future inflationary developments, the BM closely monitors the economic
situation both globally and domestically and stands ready to respond accordingly in fulfilment of
the price stability objective.
/s/
Rogerio Zandamela, Governor

Annex III. External Sector Assessment
Overall Assessment: The external position of Mozambique in 2022 was substantially weaker than
the level implied by medium-term fundamentals and desirable policies. The non-megaproject
current account deficit was 20.1 percent of GDP in 2022, vis-à-vis an estimated current account
deficit norm of 9.9 percent of GDP. The EBA-lite current account model indicates an overvaluation
of the real effective exchange rate of up to 56 percent. The external position is expected to
strengthen as LNG production and exports rise and as structural reforms to promote diversification
bear fruit.
1. External sector assessments for Mozambique are subject to considerable

uncertainty due to data limitations surrounding megaproject activities. “Megaprojects” are
large, foreign enterprise-led and funded
Figure AIII.1. Mozambique: Current Account
investments in extractive sectors,
Decomposition
specifically coal, aluminum, and natural gas,
(Percent of GDP)
that produce overwhelmingly for export. 60
Associated imports are fully financed 40
through offshore special investment 20
vehicles. While they are based outside the 0
country, flows related to these vehicles are -20
included in the balance of payments

-40
-60
statistics for completeness, though they do -80
not have a bearing on international -100
reserves. The non-megaproject current 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
account is therefore the appropriate Export megaprojects Other exports
concept to assess the external position. Imports megaprojects

Net service megaproject
Other imports
Other net service
While the authorities produce accurate Primary income (net) Secondary income (net)
external sector data for the megaprojects

Current account balance
Sources: IMF Staff Estimates
themselves, only rough estimates are

available for the external flows related to
domestic firms that are exclusively focused on supporting megaprojects’ activities. To better
describe the external accounts that impinge directly on the domestically focused, traditional
economy, staff has estimated a current account balance and a net international investment
position excluding megaprojects (directly and indirectly), following the same approach used in
previous external sector assessments. 1
2. Mozambique has seen large current account deficits and negative NIIP for over
a decade. The current account deficit has been dominated in recent years by large investment-
related imports by the megaprojects; it deteriorated in 2022 with the importation of the LNG
1
This approach involves making additional adjustments to the non-megaproject current account by estimating
and deducting megaprojects’ indirect or induced imports within the traditional economy. It is used throughout
the External Sector Assessment.

platform (estimated at US$4.4 billion). The development of megaprojects is financed through

significant FDI inflows. 2 The baseline
forecast assumes that development of Figure AIII.2. Mozambique: Net International
the first onshore LNG Investment Position
project will resume during 2023. The (Percent of GDP)
main difference with the previous
0
assessment is that a slight delay in the
-100
resumption of the project means that
the current account is expected to -200
improve somewhat in 2023, before -300

Total economy
worsening in the following years as -400 Excluding MP
large LNG-related imports resume. Excluding MP and MP related firms
-500
The NIIP is projected to stabilize at the
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
current level as the large increase in
investment-related imports for the Sources: IMF Staff Estimates
development of the onshore projects

will start as exports from the offshore
platform peak. A turnaround in the NIIP is projected from 2027 onward, when the first onshore
LNG megaproject starts production, and is expected to improve in the long run as Mozambique
becomes a major LNG exporter.
3. The non-megaproject current Figure AIII.3. Mozambique: Current Account

account deficit was stable during 2017– Balance
20, but has since increased. After (Percent of GDP)
hovering around 18 percent of GDP
0
between 2017 and 2020, it increased to an
-10
estimated 20 percent of GDP in 2022, as
-20
higher commodity exports—reflecting
-30
higher global commodity prices and
-40
demand—did not offset higher imports of Total economy
-50 Excluding MP
goods and services. The deficit is
3
Excluding MP and MP related firms
-60
projected to decrease over the medium
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
term, as productivity improvements, Sources: IMF Staff Estimates

including in the agriculture sector, foster
an increase in exports that outpaces non-
megaproject import growth. The non-megaproject NIIP is projected to strengthen over the
projection period.
2
While the Coordinated Direct Investment Survey (CDIS) indicates an inward FDI position of around USD
76.6 billion, the IIP indicates only USD 51.5 FDI liabilities for end-2021. This discrepancy is explained by more
extensive coverage of enterprises in the CDIS. The authorities are working on improving coverage of the BOP and
IIP data, notably with the help of IMF TA.
3
The current account deficit excluding only megaproject firms (dotted red line in the chart) was nearly
10 percentage points higher at 29.5 percent of GDP in 2022.

4. The REER has appreciated Figure AIII.4. Mozambique: Nominal and Real
significantly since its recent low in Effective Exchange Rate
2021. The REER has been appreciating (Index,
( 2010=100)
, )
140
since early 2021, gaining more than 40 Nominal Effective Exchange Rate
130
percent between January 2021 and 120 Real Effective Exchange Rate
December 2022. In March 2023 it was 110
21 percent higher than the average REER 100
during 2018-20. A tight monetary stance 90

80
combined with a de facto fixed exchange
70
rate against the US dollar since July 2021 60
accounts for a broadly stable NEER. In 50
this context, domestic inflation higher 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
than inflation in trade partners was the Source: IMF Staff Calculations
main driver of the appreciation of the

REER.
5. The non-megaproject
Table AIII.1. Mozambique: EBA-Lite Model Results,
financial account was stable
2022
between 2021 and 2022. Non- CA model 1/ REER model 1/
megaproject FDI, which was at (in percent of GDP)
CA-Actual 2/ -20.1
around US$2 billion mostly due to Cyclical contributions (from model) (-) 4.6
a company’s financial operation— COVID-19 adjustors (-) 3/ -0.2
converting debt into investment— Additional temporary/statistical factors (-)

Natural disasters and conflicts (-)
0.0
-0.1
contracted to around US$650 million Adjusted CA -24.5
in 2022, a level slightly higher than in CA Norm (from model) 4/ -9.7
2020. Such uneven evolution stems Adjustments to the norm (-)

Adjusted CA Norm
0.0
-9.7
from FDI remaining very much linked CA Gap -14.8 …
to bulky investment projects. o/w Relative policy gap -2.8
Meanwhile, the megaproject current Elasticity -0.28
account is fully financed through FDI REER Gap (in percent) 52.5 -10.9
1/ Based on the EBA-lite 3.0 methodology
and trade credits, which tend to 2/ The CA-Actual refers to the non-megaproject CA account including
constitute the largest financial flows. imports adjustments.

3/ Additional cyclical adjustment to account for the temporary impact of the pandemic on
Multilateral financing decreased in tourism (0.2 percent of GDP).
2022, leading to a net repayment of 4/ Cyclically adjusted, including multilateral
the external public debt, while net

debt of the non-megaproject private sector contracted by around $650 million.
6. The external sector position was substantially weaker than implied by

fundamentals and desirable policy settings. Using the EBA-lite current account model, the
adjusted current account norm (excluding megaprojects) is estimated at a deficit of 9.7 percent
of GDP. This compares to an estimated adjusted non-megaproject current account deficit of 24.5
percent of GDP, implying a REER gap of 52.5 percent using an elasticity of -0.28. Conversely, the
REER approach indicates an undervaluation of the REER of 10.9 percent. Results across the two

methodologies are not directly comparable, as the current account model is estimated on the
non-megaproject economy, while the REER approach—due to data limitations—includes the
whole economy. As the non-megaproject economy is the appropriate scope for the assessment,
results from the current account approach are chosen as a more suitable basis for the
assessment.
7. Gross international reserves are at nearly 4.3 months of import coverage, which is
above the minimum buffer commonly recommended for LICs. 4 Gross international reserves
have been falling since early 2021, and reached US$2.9 billion at end-2022, covering 4.3 months
of projected non-megaproject imports of goods and services in 2023. 5 Higher fuel import costs
in 2022 drained reserves, since the Bank of Mozambique provided FX to the main fuel importers.
At the same time, non-megaproject imports have significantly increased over the past couple of
years, further decreasing import coverage of reserves. In January 2023, the Bank of Mozambique
raised the required reserve ratio for foreign current deposits from 11.5 percent to 28 percent. In
April 20023, it reduced its provision of FX to fuel importers from 100 percent of the fuel bill to 60
percent. The BM has also announced that it will cease providing FX to fuel importers altogether
starting in June.
8. External imbalances are expected to decline in the medium term as LNG production
picks up and diversification policies bear fruit. Government policy to improve infrastructure
and increase productivity in the agricultural sector will be crucial to enhance competitiveness and
foster non-megaproject exports. Measures to foster human capital development and improve
the business climate could encourage inclusive and resilient growth, and productivity
improvements.
4
It is recommended for LICs to have at least three months of import coverage. The IMF’s metric to assess reserve
adequacy in credit-constrained economies with de facto fixed exchange rate, with assumed cost of holding
reserves of 4 percent, indicates that an adequate reserve cover for Mozambique is 8.8 months of non-
megaproject imports (adjusted for indirect or induced megaproject imports). However, the last published AREAER
assessment classifies Mozambique as having a crawl-like arrangement.
5
At end 2022, international reserves covered 4.3 months of projected 2023 imports of goods and services
excluding those carried out by megaproject international firms and imports by the traditional economy firms that
are induced by megaprojects activity, 3.5 months of projected non-megaproject imports (i.e., carried out by
traditional economy firms), or 2.9 months of projected total imports.

Appendix I. Letter of Intent

June 16, 2023
Ms Kristalina Georgieva
Managing Director
International Monetary Fund
Washington, DC 20431
USA
Dear Ms Georgieva,
The Republic of Mozambique remains committed to the reform program supported by the
Extended Credit Facility (ECF) arrangement with the IMF. Despite a challenging international
environment, we have made progress on our commitments. The attached Memorandum of
Economic and Financial Policies (MEFP) updates the previous memorandum and describes
progress and further policy steps to meet our objectives.
In the period to December 2022, we have met two quantitative performance criteria (the floor on
net international reserves (NIR), and ceiling on new non-concessional external debt). Similarly, we
met the indicative target on the ceiling on the present value of new external debt. We have also
submitted to Parliament the law on the Sovereign Wealth Fund, established a quarterly Treasury
Budget which will determine limits on quarterly commitments and eliminate ex-ante weekly
commitment limits in the budget law and corresponding budget execution circular, and fully
implemented in all spending units e-SISTAFE tools for budgetary planning and financial
programming—three cornerstone structural benchmarks and important steps forward in our
governance and financial integrity agenda. However, we missed the indicative targets on the
floor on social spending and the ceiling on the stock of domestic debt.
In the fourth quarter of 2022, inflation decelerated, amid lower import prices, and tight monetary
policy. In particular, international food and energy prices, which had increased earlier in the year
due to the war in Ukraine, began to ease significantly, leading to a breach of the lower bound
under the Monetary Policy Consultation Clause (MPCC) in December 2022. We attach a letter to
the Executive Board explaining the circumstances for the breach, and our policy response. We
have agreed on a new corridor for consultations under the MPCC, while retaining our medium-
term objectives of achieving inflation between 5 and 6 percent.
We embarked on a wage reform which aimed at simplifying public employment compensation

and managing the cost of public sector employment with the aim of aligning the wage bill to
around 11 percent of GDP over the medium term. Initial reforms passed by the National
Assembly in 2021 were aimed at improving controls and predictability over wage bill spending.
During the implementation phase, we encountered higher costs than estimated for the wage bill
reform resulting in primary deficit after grants of 2.8 percent of GDP compared to a projection of
0.2 percent of GDP. We are committed to adopt credible corrective measures to ensure fiscal
discipline and achieve the medium-term fiscal consolidation envisaged under the program. The
package of corrective measures of about 1 percent of GDP will be comprised of revenues and

wage bill reducing measures. In addition, and to help rationalize the wage bill over the medium
term, we are committed to prepare an action plan to reduce the wage bill to 11 percent of GDP
over the medium-term.
We are advancing with the core fiscal reforms needed to foster growth and achieve our debt
reduction objectives. With respect to VAT reform, we are striving to fully implement the
elimination of exemptions and zero-ratings identified through the 2022 prior action, including
the elimination of the VAT exemptions and domestic zero rate remaining from the 2022 list of
prior action by end-2023. Our domestic revenue mobilization effort includes aligning the
reference price of the extractive industry to international prices in line with best practice. In
addition, the April decision on the resumption of the automatic fuel price mechanism for diesel
and gasoline prices will help reduce market frictions and fiscal liability. To mitigate the impact of
higher fuel prices on the most vulnerable, we provide direct subsidies to public transportation
companies to contain the impact of fluctuation in international prices on the fare of public
transportation.
Due to delays in finalizing the update to our National Development Plan, we are requesting an
extension of Poverty Reduction Strategy until the fourth review. We are requesting the
completion of the financing assurance review. In addition, we are requesting a waiver on the
missed Quantitative Performance Criteria on the domestic primary balance supported by policy
measures adopted and committed to ensure fiscal sustainability over the medium-term. We also
request a waiver for missing the target on non-accumulation of external arrears. These external
arrears have been settled, and we are taking concrete administrative steps to ensure such arrears
are not repeated. In view of continued pressures on FX reserves in the first half of 2023, we are
requesting to modify the NIR floor at $2bn in line with the floor for 2022, as the current target is
set at $2.2bn.
We are moving ahead with our structural agenda. To improve governance and strengthen
efficiency of public spending, we are planning to submit to Parliament an amendment to the
Public Probity Law before end-June 2023. We are also working to address Mozambique’s recent
grey listing by implementing the action plan adopted by the Financial Action Task Force (FATF)
Plenary. In particular, we plan to make adequate, accurate and up-to-date information on
beneficial ownership publicly accessible at the centralized registry in line with FATF standards by
end-2023.Moreover, we are advancing with extensive public financial management and revenue
administration reforms, and pursuing a broad agenda of reforms in monetary, foreign exchange
and central bank organization. Finally, we reiterate our commitment to transparency and
accountability in the use of the 2021 SDR allocation, in full compliance with the Memorandum of
Understanding signed by the Bank of Mozambique and the Ministry of Economy and Finance.
Based on strong performance to date and our continued commitment to the reforms in our
program supported by the ECF, we request approval by the IMF Executive Board of completion
of the second review and the related disbursement of SDR 45.44 million, and modification of the
MPCC to reflect inflationary developments and our policy response. The program will continue to
be monitored through six-monthly reviews, prior actions, quantitative performance criteria (QPC),
indicative targets (ITs), and structural benchmarks (SBs) as described in the attached MEFP and
Technical Memorandum of Understanding (TMU).

We believe the policies set forth in the attached MEFP are adequate for the implementation of
the program, and we will take any additional measures that may be appropriate for this purpose.
We will consult with the IMF before adopting any such measures or in advance of revisions to the
policies contained in the MEFP. Moreover, we will provide all information requested by the IMF
to assess implementation of the program.
Sincerely,
/s/ /s/
Ernesto Max Elias Tonela Rogério Lucas Zandamela
Minister of Economy and Finance Governor of the Bank of Mozambique

Attachment I. Memorandum of Economic and Financial Policies
A. Context and Objectives
1. The government continues to pursue a sustainable development path for

Mozambique whilst confronting emerging and significant challenges. These will continue to
hamper development over the medium-term and include: fluctuating global economic
circumstances such as persistent inflation and weakened global supply chains; more frequent and
intense natural disasters driven by a changing global climate; and security issues in the north of
the country.
2. The government’s key development priorities are outlined in its quinquennial

program and focus on fostering sustained inclusive growth and strengthening governance
and institutions. The program centers on the development of human capital, promotion of
gender equity, social inclusion, and protection of the most vulnerable. It aims to support
economic growth and decentralization while safeguarding fiscal and debt sustainability. The
program proposes a stable and transparent institutional framework for the management of
natural resource wealth, particularly for hydrocarbons. The draft National Development Strategy
(ENDE) has been published on the MEF website and a final version will be submitted to the
National Assembly by September-2023.
3. The government’s Economic and Financial Program 2022-2025 (EFP), supported by

the IMF’s Extended Credit Facility (ECF), aims to foster sustainable and inclusive growth.
Under the EFP, the government is supporting economic recovery by avoiding a large upfront
adjustment, while addressing debt and structural challenges which are contributing to
macroeconomic vulnerabilities and driving protracted balance of payment needs. The EFP aims
to ensure that public debt declines over the medium term. The government continues to build
institutions and capacity which are required to manage public resources efficiently and
effectively. Measures already implemented by the government include: i) reforming the wage bill;
ii) applying appropriate fiscal rules and institutions for LNG resources; iii) addressing concerns
around governance, transparency, and corruption; and iv) enhancing equality of opportunities
and social inclusion.
4. The IMF Executive Board approved a three-year arrangement under the ECF to
support Mozambique’s EFP on May 9, 2022. The ECF supports the policy aims of the
government through fostering economic recovery and policies to reduce public debt and
financing vulnerabilities and creating fiscal space for service provision, priority investments in
human capital, climate adaptation and infrastructure. Support for the EFP also focuses on
strengthening governance institutions and the management of public resources while improving
the business environment to address protracted Balance of Payment (BoP) needs.

5. The government has met its ECF international reserves targets for end-December
2022, but fiscal targets were not met, (Table 1). The quantitative performance criterion (QPC)
on:
• The floor of net international reserves of the Bank of Mozambique was met
• The quantitative performance criterion on the floor of the domestic primary budget
balance was not met, at deficit of about MT 30.6 billion compared to a target of a surplus
of MT 2.7 billion.
• The indicative target on the social spending floor was not met by a small margin (MT 5.7
billion v MT 5.8 billion).
• The quantitative performance criterion on non-accumulation of new external arrears was

not met, as the government incurred delays of over 30 days to repay debt service for an
SOE external debt with Spain, and debt service with Portugal and the Islamic
Development Bank.
• The indicative target on the ceiling on the stock of domestic debt, also adjusted by the
amount of exchange rate valuation related to the World Bank disbursement, was not met
at MT 281.5 billion, relative to a program target of MT 271.4 billion.
6. CPI inflation decreased, for the fourth consecutive month, to 10.3 percent at end-
December 2022, below the lower bound of the inflation band of 12 percent, triggering the
consultation clause under the program. In a letter addressed to the IMF Executive Board, the
government explained that inflation breached the lower limit of the consultation band
(12–18 percent), mainly driven by the non-transmission of high international fuel prices to
domestic fuel prices. The impact on inflation of a pick-up in the domestic economy was relatively
contained, despite a rebound in economic activity across a broad range of sectors, as the stance
of monetary policy remained tight. Inflation is expected to decelerate to 6.7 percent by end-
2023, followed by a further deceleration to 6.5 percent in 2024 and 5.7 percent in 2025. This
baseline scenario is predicated on a tightening of fiscal policy in line with the ECF objectives.
7. The structural benchmarks under the ECF were broadly met. These are as follows:
• The law on the Sovereign Wealth Fund (SWF) on LNG resources was submitted to the
National Assembly in December (SB end-2022);
• The attrition rule for civil servants in the 2023 budget (hiring limit of one out of three
leaving employees) as described in Table 2 of the MEFP was implemented;
• The structural benchmark on implementing the proposed elimination of VAT exemptions

and zero-ratings identified through the 2022 prior action was not met. The National
Assembly, recognizing that some of these adjustments would have an effect on basic

items, took the approach to phasing the elimination over a further 12 months, the intent
of the benchmark will be fully implemented by January 2024;
• The e-SISTAFE tools for annual budgetary planning and quarterly financial programming
were fully implemented in all spending units at end-2022;
• The structural benchmark on establishing a quarterly Treasury budget to determine limits

on quarterly commitments to be operationalized and eliminate ex-ante weekly
commitments limits in the budget law for 2023 and in the corresponding budget
execution circular was met by end-January 2023
8. Other structural measures stated in the November 2022 Memorandum of Economic

and Financial Policies (MEFP) were completed.
• Strengthen social protection and contributing to the reduction in the incidence of

poverty, the government is finalizing consultations on the ENDE with stakeholders and
will submit the final version to the National Assembly by 2023.
• To progress in the management of public resources, the government:
o planned an interdepartmental cash management committee for financial

programming Comité de Programação Financeira, CPF) to be supported by the
cash management unit within Treasury to forecast and manage cash flows;
o set and operationalized Treasury Budget limits on quarterly expenditure

commitments at end-January 2023. This is applicable to all units and institutions
and ensures expenditure is engaged on a commitment basis according to the
budget law; commenced the implementation of including public investment
procurement plans of central government entities through e-SISTAFE; and
o prepared, through its public enterprises directorate Instituto de Gestao das

Participacoes do Estado (IGEPE), a mapping of all existing state-owned
enterprises (SOEs) and their subsidiaries and published a set of consolidated 2020
accounts in April 2023.
• To buttress its revenue administration, the government:
o reinforced the VAT refund mechanism by revising the VAT legislation, which
establishes a 12-month limit for refund claims, alongside the approval of an
alternative refund mechanism for the extractive sector;
o completed the third phase of its integrated electronic tax filing system (e-
tributação) by extending the system beyond the main tax categories to other
taxes such as the donation tax and stamp duties; and

o cleaned and updated its taxpayer registry, including the removal of duplicated
taxpayers and verifying the registry for the largest 100 taxpayers in 2022.
• To continue building the basis for an inflation targeting framework, the

government:
o reformed the interbank market, The public communication on the intervention

policy was made available in December 2022. Internal guidelines on intervention
policy were approved on the same date as the FX intervention policy. The two
instruments entered into force on the same day.
o reformed the foreign exchange (FX) market – The Bank of Mozambique (BdM) is
currently drafting implementing regulations to support the new FX law passed by
the National Assembly in October 2022 (with effect from January 29, 2023). The
BdM eliminated the practice of supplying FX required by banks’ clients for their
petroleum imports from June 2023, an additional step towards an expanded
opportunity for price discovery in the FX market. The BdM approved a normative
related to the proceeds from oil re‑exportation in March 2023.
• To strengthen the AML/CFT framework, the government is preparing regulations for

implementing the AML/CFT law to be approved by July 2023. The manual for risk-based
supervision was approved by the BdM Board on April 27, 2023. The manual will be
enforced by an internal regulation, which will be available to all supervisors. The law
addressing money laundering risks in non-governmental organizations has been
submitted to the National Assembly and is expected to be approved in the coming
months.
• To progress in its financial inclusion agenda, in 2022 68.5 of adult population had
obtained access to accounts with Mobile Money Operators (MMO) surpassing the
government’s objective of 60 percent. The interoperability between the various MMOs
has been in effect since the second half of 2022, which is an important step to foster
financial inclusion. The legal regime for bank accounts was approved in October 2022.
• To gradually remove restrictions on capital and financial account international

transactions, the new FX law provides a legal environment where the BdM can
confidently implement the gradual liberalization of international transactions on both the
capital and financial account. While the process of relaxing some of the capital and
financial transactions were initiated in 2017, the BdM is currently working on supporting
regulations to the new FX law which is expected to be finalized by end-2023.
9. The government is fully committed to the November 2022 MEFP. Unless modified
below, those policies remain valid in full. The quantitative targets that serve as performance
criteria and indicative targets are proposed to be updated. These updates targets and structural
benchmarks are presented in Table 1 and Table 2, respectively.

B. Supporting the Recovery
10. The economy continues its post-COVID-19 recovery, despite the significant global
inflationary shock with real GDP growth estimated to have further grown by 4.1 percent in
2022. This builds on the recovery of 2.3 percent in 2021. The acceleration is driven by a broad-
based recovery across primary, secondary and tertiary sectors. The start of LNG production in
October 2022, with the ENI-led Coral South project, is expected to meaningfully contribute to
real GDP growth from 2023 onwards. Global inflationary pressures continued to present
challenges, with inflation peaking in August 2022 at 12.1 percent (y/y).
11. In September 2022, the BdM further raised the policy rate from 15.25 to 17.25
percent (200bps). Subsequently, headline and core inflation steadily declined to 10.3 percent
(year on year) (September to December 2022). The significant widening of the current account
deficit was due to the import of the LNG offshore platform in 2022. Higher fuel prices led to a
growing fuel import bill, prompted a steady decline in international reserves, from 4.5 months of
goods and services (excluding megaprojects) at December-2021 to 3.5 months at December
2022. The BdM´s measure to end its provision of FX to fuel importers since June/2023 should
help to limit further decline in Net International Reserves.
12. Consumer price inflation (CPI) is expected to further moderate to 6.7 percent at
end-2023. The BdM stands ready to maintain its cautious monetary policy stance of returning
inflation to single digits and ensure that expectations remain well-anchored around that
objective. Since January 2023, the BdM increased the reserve requirements from 10.5 percent to
39.0 percent for domestic currency liabilities and 11.5 percent to 39.5 percent for foreign
currency liabilities, in order to absorb excessive liquidity in the banking system, with the potential
to generate inflationary pressure. Over the medium term, as financing conditions improve and
fiscal pressures abate, the BdM will explore the scope for easing monetary policy to foster lower
real lending rates and higher credit growth subject to continuing moderate inflation
expectations, settling between 5 and 6 percent. The BdM will continue to aim at maintaining
financial sector strength.
13. The government adhered to a prudent fiscal stance in line with the 2023 approved
budget by taking corrective measures to address wage bill slippages which became
apparent in 2022. The primary balance after grants, on a modified cash basis is expected to
reach MT5.4 billion (0.4 percent of GDP) compared to a projection of primary deficit after grants
of MT 9.1 billion (0.7 percent of GDP) in 2023. 1 The overall deficit after grants is projected to be
lower than projections at MT 45.1 billion (3.9 percent of GDP) in 2023. This reflects projected
budget support grants in 2023, including US$200 million from the World Bank and use of MT 5.7
billion of the 2021 Special drawing Rights (SDR) allocation and less reliance on domestic debt.
14. The government continues to strengthen social protection and reduce the
incidence poverty. The National Strategy for Basic Social Security 2016-2024 aims to strengthen
1
Modified cash balances are adjusted for payments in arrears.

social protection and outline macroeconomic and financial policies to support poverty reduction.
The government will continue to provide resources for social protection programs to meet the
2023 budget allocation of MT 6.8 billion (0.5 percent of GDP).
15. The country’s medium-term prospects remain positive with the heart of the
government’s program centered on increasing non-LNG growth. For the years ahead, non-
LNG growth is conservatively expected to stabilize at around 4 percent per annum, assuming no
spillovers from LNG production. The government believes there is scope to increase this level of
growth. This will require working with our young population, ensuring the availability of ample
arable land, improving access to water and energy resources, making investments in human
capital—through expanding provision of services in health, education, and social protection and
investing in more climate-resilient infrastructure.
16. Mozambique is set to become a major global LNG producer, and LNG production is
expected to have a significant impact on overall economic growth. Mozambican LNG is an
important factor in the global energy transition to cleaner fuels, characterized by a relatively low
carbon content relative to other fossil fuels. Mozambique is also well located to supply Asian and
European markets. Production at the ENI-led Coral South project is expected to yield an
additional 3.3 pp to real economic growth in 2023, and moderating in 2024 and 2025 as
production volumes reach full capacity. The significantly larger Total Energies-led Mozambique
LNG project is expected to start production in 2027. A third, ExxonMobil-led project (Rovuma
LNG) is expected to follow in 2029.
17. The rapid growth in LNG poses challenges, and the government will establish
policies to preserve internal and external macroeconomic balances. This will require the
government to manage the risks of an appreciation in the exchange rate that could undermine
non-hydrocarbon sector competitiveness, bring about asset price inflation, and other distortions
to the wider economy.
18. Over the medium term, the government's fiscal policy objective is aimed at
supporting ongoing economic recovery, reducing both public debt and macroeconomic
vulnerabilities, and better control fiscal risks. The fiscal objectives and targets (which are
anchored public spending will reduce from 32.3% of GDP in 2022 to 27.4% in 2026) will
strengthen the fiscal position over the medium term and favor a declining path of the public
debt stock from 82 percent of GDP in 2022. 2 The generation of primary surpluses and less
recourse to domestic borrowing to finance the budget deficit will also have a positive effect on
private sector financing.
19. Achieving the fiscal policy objective will allow the reduction of gross financing
needs after grants from 8.1% of GDP in 2022 to 4.9% in 2023 to 2.6% in 2026. The
2
The contraction of the debt stock in 2022 is due to the isolation of the assets of Area 1 and the regularization of
the accounting records of the assets of Area 4 to be removed from ENH's balance sheet, starting to be registered
in the Special Purpose Vehicle (SPV) balance sheet of the project.

government will continue to prioritize external borrowing on favorable financing terms over
domestic borrowings to finance the budget deficit.
C. Creating Space for Priority Spending while Addressing Public Debt

Vulnerabilities
20. The government’s policies will principally focus on long-term sustainability of

public debt. Reversing the rising trend of the debt-to-GDP ratio (82 percent at end-2022) and
reducing external public debt risks will reduce structural vulnerabilities and create policy space to
manage the impact of possible future shocks. Reducing debt service costs will create fiscal space
to support our development objectives.
21. The government will adopt strong fiscal policy stance to achieve this objective
aimed at achieving a primary surplus by 2024. The following measures underpin this goal:
• Public employment compensation reforms: The government is commitment to simplifying

public employment compensation and will continue with reforms aimed at better
managing the cost of public sector employment with the aim of adjusting the wage bill
over the medium term to sustainable levels and reaching the overall objective of 10
percent of GDP by 2028. Initial reforms passed by the National Assembly in 2021 were
aimed at improving controls and predictability over wage bill spending. These reforms
were concentrated on rebalancing the composition of employee remuneration towards
basic wages and the movement of employees in and out of public sector positions. The
initial estimated costs of the reform were an upfront cost of 0.7 percent of GDP in 2022,
and a full year cost of 1.6 percent of GDP from 2023. In the last quarter of 2022, it
became apparent the full cost of the reform in 2023 would exceed initial estimates
following the actions taken to incorporate feedback from civil servants on issues of
concern with the initial suite of reforms.
• The following measures (total savings of approximately 2.5 percent of GDP) were
implemented in January 2023 to ensure the sustainability of the reform, and contain the
overall cost of public sector remuneration:
a. adjusting nominal wage levels relative to the paypoint levels articulated in the
original TSU framework;
b. a freeze on any increase in nominal public sector wage levels; and
c. not paying the 13th month wage payment (in relation to the previous calendar year).
i. Commit to continue replacing one out of three leaving employees except in the sectors
of education, health, justice administration bodies, and agriculture. Implementation of
the employment attrition rule will be monitored and verified by the Ministry of State

Administration (Ministerio da Administração Estatal e da Função Publica—MAEFP), and

this rule will be maintained in 2023 and 2024 (structural benchmark).
ii. Additional corrective measures which the authorities are implementing include an action
plan to control the wage bill and achieve a wage bill to GDP ratio of 10 percent of GDP
by the end of the medium-term (2030). The action plan will be supported by policy
measures to reduce the wage bill and increase revenue to achieve the fiscal targets
consistent with the 2023 budget and the authorities’ commitments under the ECF
(structural benchmark by end-December 2023). These include the following:
Wage Bill Reducing Measures
• Amending the TSU law by reducing the percentage of the reference salary which is
applied for the calculation of the representation subsidy, for statutorily appointed and
elected holders of public office by June 2023;
• Incorporation of 100 percent of all public sector servants into the electronic payroll
system (e-folha) by end-June 2023;
• fortifying internal controls (such as proof of live evidence) on the payroll system for all
sectors starting in June 2023; and
• implementing the findings of Inspector-General of Finances (IGF’s) audit of the TSU

mapping arrangements for all civil and non-civil servants by September-2023 and in the
subsequent payroll and concurrent to the audit report findings release.
Revenue Measures
• Ensuring compliance measures and enforcement of personal income tax collection of all
sectors starting from June and going forward.
• Decision adopted by Council of Ministers on May 9 and made effective May 11 which
resumes the automatic fuel price mechanism for diesel and gasoline prices. The
resumption of the automatic fuel price mechanism increased the price of diesel and
decreased the price of gasoline. The price of cooking gas was not affected by this
resumption, which will ensure the basic cost of goods remains unchanged.
• Ensuring the reference price of mineral products upon which the tax base is calculated is
made on the basis of international prices instead of the current practice of using the
firm's last declared price. A joint MEF-MIREME Ministerial Diploma (Regulation) to
determine the reference price of minerals in line with international prices will be issued
by end-May 2023. The Ministerial Diploma will establish a committee composed of MEF,
Tax Authority, and MIREME, responsible for updating the reference price for minerals
using the latest international prices on monthly basis starting on the date determined by
the Ministerial Diploma (structural benchmark by September 2023).

iii. Contingency funds. The contingency funds provided in the 2023 budget partially cover
the wage bill overruns and other risks identified in the Report on Fiscal Risks for 2023.
iv. VAT reform. Broadening the VAT base aims to build a robust and fair revenue collection
mechanism that does not depend on volatile commodity revenues. Effective from January
1, 2023, the government eliminated some VAT exemptions, with some further
exemptions to be eliminated from January 1,2024) domestic zero-ratings on goods and
services other than basic items and exemptions for the agricultural and renewables
sectors according to government development priorities. The legal changes also reduced
the tax rate to 16 percent and modified the window during which VAT refunds can be
claimed to 12 months (¶X).
v. Revenue administration and public financial management (PFM). With technical assistance
from the IMF and other development partners, the government continues to improve the
efficiency of the revenue administration (¶¶35 to 39), and PFM (¶¶40 to 44).
22. The government continues to strengthen its institutional capacity for public debt
management. The government remains committed to building the capacity of the public debt
management directorate within MEF, and enhance the sustainability and transparency of public
sector debt management, by publishing quarterly and annual debt reports which cover stocks,
on-lending, and state guarantees, including SOEs. The transition to a new database (Meridian) for
public debt management will encompass external, domestic and on-lending to SOEs.
Communication with the markets will be further strengthened. The updated Medium Term Debt
Strategy (MTDS) to be approved by the Minister by end-June 2023 will reflect developments in
the global and domestic economy and in financial markets. Following a capital market diagnostic,
the government is now working on the development on the concrete intervention measures
aimed at strengthening the market over the medium-term horizon. The National Debt
Directorate plans to continue developing the government bond markets in the country, and this
action is a recommendation in the MTDS.
23. The government is taking measures to avoid repeated occurrence of delays in debt
service payments, which have occurred in the past few months. These delays were partly due
to discrepancies between the internally forecast debt service and the invoices sent by the
creditors, as well as liquidity constraints. The government has been clearing the debt database to
avoid such errors and ahead of the migration to the new database, which will encompass
external and domestic debt by December 2023, and eventually on-lending to SOEs. In addition,
urgent measures aimed at building contingent provisions for the Treasury are being studied,
including the concentration/consolidation of public sector deposits with the purpose of building
a liquidity/cash pool which would provide Government with prompt and efficient access to
relatively cheaper resources by tapping the idle deposits of public institutions to finance
temporary/seasonal deficits. In addition, the government is looking to restrain issuances of short-
to medium-term bonds to avoid incurring new liabilities within this already critical redemption
horizon.

D. Governance and Management of Public Resources
24. Fulfilling Mozambique’s long-term economic potential—and meeting society’s

needs —requires decisive actions to ensure public resources are well managed. The
government has strengthened its capacity to analyze fiscal risks and publishes regular reports
through the fiscal risk directorate in MEF. The quality of fiscal risks analysis is being enhanced by
measures such as the annual credit risk analysis of the SOE sector and an analysis on PPPs to be
included in the 2024 RRF. The BdM continues to implement the recommendations from the IMF’s
2020 Safeguards Assessment.
Governance Reform
25. Key outstanding priorities from the Diagnostic Report focus on reducing scope for
corruption and conflicts of interest in the natural resource sector.
i. Reform of the public probity law. The Office of the Attorney General (Procuradoria Geral
da República) amended the Public Probity Law to: (i) clarify to which individuals the
various requirements apply; (ii) strengthen the definition of conflict of interest; (iii) require
submission of declarations of financial interests by new public servants upon hiring; and
(iv) establish published procedures for reporting conflicts of interest. The government will
submit the amended law to Parliament by end-June 2023 (structural benchmark).
ii. Beneficial ownership. Enhancing transparency on the “real beneficiaries” or individuals

who ultimately own, control or benefit from the different organizations and the income
they generate is a key commitment in the Governance Diagnostic Report, to the Financial
Action Task Force (FAFT), and to the Extractive Industries Transparency Initiative. Using
the definition of beneficial ownership in the new AML law (consistent with FATF
standards), new regulations of the Commercial Code and the AML law require all firms to
register and identify their beneficial owners at a centralized registry (Registry of Legal
Entities, CREL). The government will revise CREL regulations to approve rules and
procedures requiring that the information on beneficial ownership is adequate, accurate,
up to date and publicly accessible at the centralized registry (CREL) by end-December
2023 (new proposed structural benchmark). Going forward, the government is
considering submitting to Parliament a stand-alone law on beneficial ownership to
complete and consolidate the legal and institutional framework.
iii. Improvement of property registries for public officials. The Ministry of Justice submitted to
parliament in June 2023 a draft law that strengthens the enforcement of asset declaration
rules.
26. The government is progressing in accounting transparently for emergency-related

public spending. The second independent audit being performed to cover COVID-19 spending
in 2021, is expected to be completed by September 2023. While prosecution is undergoing for
cases of possible financial responsibility, the government internal control entities are monitoring

the implementation of the recommendations of the first audit, including through an internal
action plan of the MEF. The government will publish 2020 - 2021 external audit reports of COVID
19 emergency expenditure, including all findings except for those possibly involving financial
responsibility, by December 2023 (new structural benchmark). The government will continue
implementing the national PLACOR IV strategy aimed at strengthening the Tribunal
Administrativo’s practices and is moving to revising and clarifying the legislation to regularly
publish audit reports, and strengthening the collaboration between all public entities involved in
audit and prosecution processes.
27. The BdM Organic law is being revised. Revisions to the law will be finalized in
consultation with the IMF and the draft law will be submitted to the National Assembly by June
2024. This revision will: i) strengthen BdM’s mandate by explicitly stating its financial stability and
macroprudential functions; ii) strengthen limits on monetary financing of the budget; and iii)
improve the BdM’s autonomy, governance, and accountability.
28. The BdM will continue to modernize its internal audit function, benchmarking its
activities in this area against international best practice. A peer review External Quality
Assessment was undertaken by the Central Bank of Brazil in August 2022, evaluating consistency
with the International Professional Practices Framework (IPPF) promulgated by the Institute of
Internal Auditors (IIA). The next steps in strengthening the BdM’s internal audit function include a
revision of core internal audit regulation procedures.
29. The BdM will continue implementing recommendations from the 2020 Safeguards
Assessment to meet best practices in governance and transparency. The BdM published its
2022 audited annual reports in March 2023, ahead of the expected deadline of April 2023. It now
has a regular publication schedule, with plans to publish its audited annual reports by end of
April of the following year. The BdM is improving the management and circulation and handling
of vaults, implementing the recommendations from the September 2022 TA on cash currency
management. The BdM also received IMF/Norges Bank training on practical applications of
International Financial Reporting Standards in the central bank context.
Managing Resources from Liquefied Natural Gas
30. Harnessing the potential of LNG wealth for the Mozambican people will require
reforms across several critical areas. The government will ensure the country’s gas resources
are managed well and transparently, with broad public support. The government will aim to
ensure fiscal revenues derived from the exploitation of these natural resources is spent and
invested in an efficient and effective manner which delivers positive outcomes for Mozambique.
Finally, the government will ensure that the country’s monetary and financial frameworks are
sufficiently robust to avoid macroeconomic distortions and foster the efficient allocation of
capital in the economy.

31. The next step to operationalize the sovereign wealth fund (SWF) law is to finalize
the implementing regulations, including to optimally manage LNG resources. Investments
of the SWF ‘s resources will be managed by the BdM, and observe the highest standards of
accountability and transparency. The SWF will invest in foreign assets, assisting in managing the
macroeconomic consequences of high revenue flows, and addressing intergenerational equity.
The law includes a revenue repartition rule which divides LNG related fiscal revenues between
the SWF and the budget. Rules and conditions for using the resources in the SWF in case of
emergencies are transparent. To manage the remaining volatility in budget revenues, the
government will develop a fiscal framework covering medium-term budget objectives (in
particular public investment) and the use of resources above expected levels. To that effect, the
government will prepare implementing regulations to the SWF law that will specify objectives
for the use of LNG resources in the SWF and fiscal rules to achieve these objectives while
safeguarding macroeconomic stability.
Managing Fiscal Resources
32. Ensuring taxation is fair and government spending is efficient, effective, and
transparent are key priorities. The government will continue to build on existing, extensive
reform programs and capacity development activities.
Revenue Administration
33. The Revenue Administration (Autoridade Tributária, AT) is on track to fully

implement its modernized tax collection system, the integrated electronic tax filing system
(e-tributação). E-tributação is being used in all tax offices across the country to collect all taxes
(structural benchmark for end-December 2023). As at end-December 2022, 45 percent of total
tax receipts were collected through E-tributação. E-tributação is linked to e-SISTAFE (the financial
management information system) resulting in an automatic classification and faster transfer of
resources to the CUT (treasury single account) and interfaces with seven commercial banks. To
complete the full implementation of the system by end-2023, the AT is fine tuning the transversal
modules (fiscal execution, bankruptcies, payments by installments, risk assessments, audits,
claims and recourse, refunds and compensations, litigation and tax audits).
34. The AT continues to develop its digital interface (Portal do Contribuinte) to allow
all taxpayers to file and pay all taxes electronically by end-March 2024 (modified structural
benchmark). The interface connects the Portal do Contribuinte with e-tributação and is currently
operational for only two types of taxes, VAT, and the simplified tax for small taxpayers. At end-
March 2023, the Portal do Contribuinte covered 37 percent of total taxpayers in VAT and small
taxes, and 72 percent of large taxpayers. By March 2024, the objective is to cover all taxpayers
(structural benchmark for end-March 2024).
35. Modernizing the taxpayer registry and enhancing interoperability with other public
registries remains a key step towards achieving improved revenue collection. The AT has
cleaned and updated the taxpayer registry (NUIT), removed duplicated taxpayers, and verified

the registry for the largest 100 taxpayers. The AT is also enhancing links and interoperability of
the taxpayer registry with other public registries, including: the civil registry; the Customs’ single
window (JUE, Janela Unica Electronica); the ministries of Justice and Tourism; and commercial
banks. Going forward, it will also involve linking the taxpayer registry with utility companies.
Work is ongoing to implement a unique identification number for individuals for civil and fiscal
purposes, jointly with the ministries of Justice and Interior, with the objective of completing the
work by end-2023.
36. The AT has prepared a reform to modernize its structure and continues to progress
in gathering and cross-checking third-party information to increase taxpayer compliance
and enforce tax arrears collection. The reform proposal for the internal organization structure
of the AT is expected to be approved by the Council of Ministers by end-July 2023. The
organization structure will integrate the risk management committee created to strengthen
compliance, and design procedures for taxes and customs across all value chains, with a focus on
mining and gas taxation. This committee has started using mining and gas risk assessment matrix
to perform audits to extractive companies.
37. The MEF is committed to addressing the deficiencies in the VAT refund mechanism
and to clear accumulated arrears. MEF will draft a strategy to clear the current stock of VAT
refund arrears (amounting to MTS 39 billion at end-December 2022) and submit to the Minister
by end-June 2023, and subsequently submit a final strategy to the Council of Ministers in August
2023. The government is adhering to its commitment in the 2023 budget to retaining 16.5
percent of the share of VAT gross collection for the payment of refunds, to ensure sufficient
resources are available for refunds and avoid any further accumulation of arrears.
Public Financial Management (PFM)
38. Informed by the experience of the COVID spending and various other diagnostics, 3
the government is preparing its second PFM strategy. The strategy is anticipated to be
completed by end 2023. Its main objective is to guide PFM reforms in a prioritized and
coordinated manner and address new challenges, including strengthening budgetary execution
norms pertaining to spending in an emergency context.
39. The government is building on its important reforms of budget execution

processes to strengthen the expenditure chain and financial controls and prevent the
accumulation of expenditure arrears. To enhance budget execution control, budget discipline
and budget transparency:
i. Most of the stages of the public procurement process are already incorporated into the
e-SISTAFE system (Modulo de Património do Estado), from the preparation of
procurement plans to the signature of the contract. As of December 2022, 33 percent of
3
These diagnostics include, the Fiscal Transparency Evaluation (FTE) and the Public Expenditure and Financial
Accountability (PEFA) assessment, among others.

procured expenditures were managed through the module, including most goods and
services and public investment, with the exception of public works.
ii. The first meeting of the financial programming committee is expected to occur in June
2023. Members of the committee will comprise staff from Treasury, Budget, Accounting,
CEDSIF, Tax Authority and Debt Management. Further TA is expected in June 2023 to
design the analytical reports to support the committee’s decision-making process. The
government continues to address the operational challenges of operating the new
quarterly Treasury budget system in its initial year of operation in the absence of any
previous years’ experience. This includes challenges to better integrate revenue and debt
servicing projections into the system.
iii. The MEF is transitioning to a system where it will issue and service Treasury instruments
for cash management purposes, to smooth the profile of government cash flows and
respond to cash flow shortfalls.
40. The government aims to move from a cash rationing approach to a pro-active
management of cash flows and balances. Treasury is currently working on three pillars of the
cash flow forecasting process: i) building capacity across all government entities to better plan
their expenditures and cash requirements across the budget year; ii) developing the tools
(eventually using E-Sistafe) to provide appropriate cash flow reporting for decisions makers; and
iii) building analytical capacity within Treasury to analyze reports and advise on the cash flows
environment to the cash flow committee. Treasury will prepare rolling three monthly cash flow
forecasts on a weekly basis by end-June 2024 (newly proposed structural benchmark).
41. The legal framework for a full mapping of all public sector bank accounts,
particularly at commercial banks, is already provided through the existing SISTAFE law and
regulations. However, Treasury cannot access some of these accounts as the Bank of
Mozambique needs to request information from commercial banks. MEF is assessing how to
enhance the coverage and functioning of the treasury single account (Conta Única do Tesouro—
CUT) with an eventual full mapping of all public sector bank accounts.
42. The government has strengthened public investment management and will focus
on improving the climate resilience of public infrastructure investments. The revised
SISTAFE law regulation, revoking Decree 52/2020, brings the public investment framework into
the general PFM legal framework, and requires mandatory appraisals for capital expenditures
above US$ 30 million. The adoption of the new electronic platform (e-SNIP 4) and the revision of
the manual to assess public investment (Manual Geral de Identificação, formulação e avaliação de
Projetos) enable the government to list, assess and approve investment projects. For instance, all
new capital spending in the 2022 and 2023 budgets went through the new assessment
procedures. The government will continue to strengthen planning and project selection over
4
http://e-snip.mef.gov.mz/

time, including by using criteria pertaining to climate-change resilience of infrastructure projects,

with World Bank support.
43. The government will continue to strengthen the oversight and management of
SOEs. Building on the publication of the consolidated 2020 SOE accounts, IGEPE will launch the
external audit of these consolidated accounts by December 2023. IGEPE also aims to publish the
audited consolidated 2021 accounts by end 2023. To enhance SOE transparency and strengthen
governance, MEF-Direcao Geral de Riscos (DGR) will publish information about other public
bodies, (new SB for March 2024); and IGEPE will publish the financial risk indicators for the
complete list of entities comprising the SOEs in the consolidated account report.
44. The MEF is creating a task force to monitor the implementation and supervision of
reimbursements of on-lending agreements. The MEF issued a note reiterating the mandatory
ratification by line ministries of any multiannual loans by municipalities (as per Law No. 1/2008
Art. 20) as well as instructions to banks on complying with the specific legal requirements when
lending to municipalities. The Debt Directorate of the MEF will strengthen the oversight of
national and municipal SOEs borrowing, on-lending agreements, PPPs and public guarantees, in
coordination with the Fiscal Risks Directorate, and data will be published in annual debt and
fiscal risk reports, including on SOEs borrowing thresholds for the year ahead.
45. The government will continue to strengthen fiscal transparency and fiscal risks
management. The government will continue to publish the: i) annual medium-term fiscal
framework; ii) quarterly and annual debt management reports; and iii) fiscal risks statements.
These reports support transparent budgetary discussions, amongst other uses. The fiscal risk
statement already covers fiscal risks from SOEs and pensions, and coverage will be expanded in
2023 to initially report on PPPs. A fiscal risks management manual will be finalized and approved
by December 2023 following technical assistance from FAD.
E. Monetary and Financial Sector Reform
46. The Bank of Mozambique continues to build the basis for an inflation targeting
framework, with IMF and Norges Bank support. It aims to implement a forward-looking
monetary policy framework based on a policy interest rate (MIMO) to signal the stance of policy
and promote price stability. Effective monetary transmission of changes in the policy rate to
economic activity hinges on deepening the interbank and foreign exchange (FX) markets.
The Next Steps are as Follows:
i. In monetary operations, to sharpen its monetary policy response to the state of the
economy, the BdM plans to continue improving its forecasting process, including by
further refining its medum--term forecasts for oil and non-oil GDP. Finally, improvements
to the BdM’s provision of liquidity to the interbank market hinge on strengthened cash
flow management by the government and enhanced communication between
government agencies and the BdM.

ii. Reform of the foreign exchange (FX) market. The BdM is introducing policies to help
develop the FX market over the medium-term, including by fostering better price
discovery by market participants. The revised determination of the reference exchange
rate, based on actual volume-weighted market transactions rather than quoted rates, was
approved in May 2022. Its implementation is subject to the go-live of the BdM new IT
core system. Finally, it is laying the groundwork towards adopting the FX Global Code,
which would be a significant milestone in securing adhesion by the Bank of Mozambique,
and the banking and non-banking sectors to best international practices for the FX
market.
47. The BdM is committed to maintaining financial stability. In part reflecting increases in
capital requirements implemented in 2017, banks report strong capital and liquidity positions on
aggregate. The BdM is monitoring the dispersion of asset quality across the sector resulting from
the impacts of the pandemic and the global rise in fuel prices on borrowers and developments in
the quality of restructured loans (including affected SOEs). Supervisory actions include
monitoring compliance with loans classification and discussing business models adjustments.
48. The BdM is assessing its bank regulation and advancing in bank supervision.
Drawing on the experience of countries in the region with the implementation process, the BdM
is assessing the impact for its banking system of an eventual transition from Basel II to Basel III
capital accords. In that context, the BdM is undertaking a gap assessment of its supervisory
process and regulation with the aim of establishing a transition roadmap by end 2023, with the
effective implementation of Basel III standards to take place during the period 2024-2026. In the
context of strengthening banks solvency, the risk weights for all assets will be reevaluated.
Further collaboration between the Bank of Mozambique and the National Debt Directorate
overseeing SOE debt has been initiated. With IMF TA support, the BdM developed a regulation
on cybersecurity risks, which is being finalized after the end of the public consultation in April
2023, and conducted a pilot on-site examination of a systemic bank in 2022. From May-2023, the
BdM will receive an IMF TA to develop its manual on cybersecurity supervision.
49. The government is addressing the findings of the Eastern and Southern Africa Anti-
Money Laundering Group (ESAAMLG) mutual evaluation report. The government continues
to take a series of measures and actions to tackle significant technical compliance deficiencies
and effectiveness challenges flagged in the June 2021 report. these measures include:
• Reforms which strengthen the framework for collecting and holding beneficial ownership
information (in line with the Financial Action Task Force (FATF) definition of beneficial
ownership).
• Implementation of the risk-based supervision framework in September 2022, and the

appointment of additional staff to the BdM’s Prudential Supervision Department in
January 2023 to enhance the AML/CFT activities, while the BdM will continue assess its
relevant staffing needs

• Implementation of the risk-based supervision framework started in September 2022 and

the AML/CFT Service within the BM’s Prudential Supervision Department received
additional staff in January 2023, and will continue assessing its staffing needs.
• Strengthening the information exchange frameworkned. The BdM signed Memoranda of

Understanding (MoU) with the FIU (GIFiM), the General Inspectorate of Gaming
(Inspecção Geral de Jogos – IGJ) and the Insurance Supervision Institute of Mozambique
(Instituto de Supervisão de Seguros de Moçambique- ISSM). The BdM cooperates with
the Attorney General’s office and law enforcement under the requirements of the
Criminal Proceeding Code and their Organic Law. The General Inspectorate of Gaming
(GIG) signed a MoU with the Communications Regulatory Authority regarding the Mobile
Money Operators.
• In 2022, the BM started an awareness program to microfinance institutions throughout

the country, which is expected to be continuous.
50. Central bank reforms will strengthen the payment system and foster financial
inclusion. The government expects to have completed its evaluation of the implementation of its
2016-2022 National Financial Inclusion Strategy by end-December 2023. Recommendations from
the evaluation will inform the new strategy. The BdM is reforming the payment system law to
improve its resilience, transparency and flexibility, with technical assistance from IMF. The
government expects to submit the draft law to the parliament for approval by June-2024. The
revised law, aligned with international best practices, will strengthen BdM powers in the national
payment system, and improve financial inclusion. The implementation of the Real Time Gross
Settlement System (RTGS) is subject to the implementation of the BdM new core IT system.
51. The BdM’s crisis management framework is being strengthened. Following approval
of the regulations governing recovery and resolution planning, the BdM has issued guidelines on
recovery plans content and resolution plans’ information requirements in line withthe banking
law provisions. The BdM is proposing reforms to the Deposit Guarantee Fund Regulation, with
technical assistance from KfW, and an independent consultant hired by the World Bank, aiming
at aligning its functions with the scope of the new resolution framework, including by revising
the corporate governance structure and the revision of the premium structure paid by the
participants. The BdM expects to finalize by end-2023.
52. The government remains committed to its obligations under Article VIII, sections 2,
3, and 4 of the Fund’s Articles of Agreement.

F. Risks and Contingencies
53. The government stands ready to adjust policies if risks materialize. Downside risks to
the program include growth setbacks from commodity price or global trade shocks from
geopolitical tensions, natural disasters or from procyclical fiscal tightening resulting from a lack
of financing. Banks’ asset quality may deteriorate if the effects of higher fuel prices or the lagged
impact of the pandemic on borrower creditworthiness worsen. Important reforms could be
delayed by political and institutional constraints or have fiscal costs overshooting program
projections.
54. Medium-term risks center on recurrent risks of natural disasters and a deterioration
of the security situation, leading to further delays in the LNG projects, or full withdrawal of
the current investors. If these risks materialize, the authorities stand ready to adjust its policies,
in close consultation with IMF staff, to ensure the achievement of the program’s objectives.
G. Improving Economic Statistics
55. The government is implementing improvements to national accounts statistics. The

government is on track to produce quarterly national accounts (QNA) by expenditure. An
evaluation of available data sources for current and constant price estimates has been concluded
in 2022. The government aims to publish QNA series by expenditure at current and constant
prices, from 2011 to present, by end-June 2024. The government will also prepare and release
methodological notes underpinning the QNA by end-June 2024. Regarding the next rebasing of
the national accounts, the government will develop a project timeline by end-July 2023. The
government has resumed publishing economic activity indicators, such as monthly industrial
production and quarterly economic climate indicators in timely fashion (data is being published
with no more than a two-month lag).
56. The government is reconciling its monetary and fiscal accounts. This will improve the
identification of fungible deposits available to finance the budget of the central government and
improve the elaboration of fiscal projections and plans. The government is reconciling
government deposits as reported by the BdM and the MEF, based on TA recommendations from
the IMF Statistics department. The BdM and MEF will implement a formal process of reconciling
flows and stocks regularly and explain the differences that are identified.
H. Program Design, Financing and Monitoring
57. The ultimate responsibility of program monitoring and coordination will rest with
MEF and BdM. To ensure coordinated implementation of the program, the MEF and BdM will
consult with the other public institutions involved in meeting program objectives to track
progress on various targets and reforms under the program. Similarly, MEF will provide oversight
responsibility for ensuring that public spending is compliant with budget limits.

58. The program will be monitored by the IMF Executive Board. Assessment will be
through bi-annual performance criteria (end-June and end-December), continuous performance
criteria, indicative targets, and a Monetary Policy Consultation Clause (MPCC) for end-June 2023,
end-September 2023, end-December 2023, end-March 2024 and end-June 2024, as presented in
Table 1. To monitor progress on the structural reforms previously described, structural
benchmarks are presented in Table 2. Detailed definitions and reporting requirements for all
performance criteria, indicative targets, and the MPCC are presented in the Technical
Memorandum of Understanding (TMU) attached to this letter, which also defines the scope and
frequency of data to be reported for program monitoring purposes and presents the projected
assumptions that form the basis for some of the performance assessments. The Third, Fourth,
and Fifth reviews will take place on or after September 15, 2023 and March 15, 2024, and
September 15, 2024. To this end, the government plans to:
i. Refrain from extending new guarantees or entering into new external borrowing
contracts at non-concessional rates. Debt contracted through ENH related to already
identified LNG development projects, integral to the authorities’ development program—
for which concessional financing is not available—would be added to the borrowing plan
and as exceptions to the zero non-concessional debt limit in amounts consistent with
meeting the debt reduction objectives of the program, when details of the loan terms
become available.
ii. Adhere to the quantitative performance criteria (QPC) on the floor on the domestic
primary budget balance, the ceiling on new non-concessional external debt contracted or
guaranteed by the public sector (continuous criterion), the floor on the stock of net
international reserves of the BdM, and the zero ceiling on the accumulation of new
public and publicly guaranteed external payment arrears (continuous criterion).
iii. Adhere to the indicative targets (IT) on the ceiling on the present value of new external
debt, the ceiling on domestic debt stock, and the floor on social spending.
iv. The government will prepare an external borrowing plan to facilitate assessment of the
QPCs and ITs on external debt.
v. In line with the transition towards inflation targeting, monetary policy aims to achieve an
annual headline inflation rate centered on the program objective of 9.0 percent at end-
June 2023, 8.5 percent at end-September 2023, and 8.0 percent at end-December 2023,
with a symmetric band of ±3 percent around the objective; 7.5 percent at end-March
2024, 7.0 percent at end-June 2024, 6.5 percent at end-September 2024, 6.0 percent at
end-December 2024, and 5.5 percent at end-March 2025, with a symmetric band of ±3
percent. If inflation goes beyond the specified bands at the program test dates, the
government will complete a consultation with the IMF’s executive board analyzing the
reasons for the breach, policies undertaken to prevent it, and corrective actions that the
Bank of Mozambique plans to undertake.

vi. Not introduce or intensify restrictions on payments and transfers for current international
transactions, introduce multiple currency practices, enter into bilateral payment
agreements that are inconsistent with Article VIII of the IMF Articles of Agreement, or
introduce or intensify import restrictions for balance of payments purposes; and
vii. Adopt any new financial or structural measures that may be necessary for the success of
its policies, in consultation with the IMF.
59. The government estimates that the financing needs for the 2022-2024 program will
be covered. We currently expect US$600 million in budget support from other development
partners, of which US$550 million is from the World Bank.
60. The government believes the policies specified in this MEFP provide a foundation
for sustaining growth, reducing inflation, and alleviating poverty, and we stand ready to
take additional measures if required. The government will provide IMF staff with the information
needed to assess progress in implementing our program as specified in the TMU and will consult
with Fund staff on any measures that may be appropriate at the initiative of the government or
whenever the Fund requests a consultation. The government intends to make this letter and the
TMU available to the public. In this context, it authorizes the IMF to arrange for them to be
posted on the IMF website, subsequent to Executive Board approval.
61. Accordingly, the government is requesting Board approval of the policies set forth
in the MEFP, and disbursement of the second loan installment, totaling SDR 45.44 million,
out of a total three-year arrangement of SDR 340.8 million.

Table 1. Mozambique: Quantitative Performance Criteria (QPC) and Indicative Targets (IT) for the Program Under the ECF
70
Arrangement
(Billions of meticais, unless otherwise indicated)
End-Dec 2022 End-Mar 2023 End-June 2023 End-Sept 2023 End-Dec 2023 End-Mar 2024 End-June 2024
QPC PC/IT Adjusted Actual Status IT Actual Status QPC Prop. rev. QPC IT Prop. rev. IT QPC Prop. rev. QPC Prop. IT Prop.QPC
Performance Criteria
Floor on domestic primary budget balance
1/
2.7 -30.6 not met 1.6 5.3 2.0 7.5 2.0 7.5
Ceiling on new non-concessional external debt contracted or guaranteed by the public sector
2/
0 0 met 0 0 0 0 0 0
Floor on the stock of net international reserves of the BM (US$ millions) 2000 1976 2251 met 2200 2292 met 2200 2000 2200 2000 2200 2000 2000 2000
3/
Ceiling on the accumulation of new public and publicly-guaranteed external payment arrears. (US$ million) 0 1 not met 0 0 0 0 0 0
MPCC 4/5/
Inflation (upper-band, percent) 18.0 16.0 13.5 12.0 12.5 11.5 11.0 11.0 10.5 10.0
Inflation (mid-point, percent) 15.0 10.3 not met 14.0 9.3 11.5 9.0 10.5 8.5 9.0 8.0 7.5 7.0
Inflation (lower-band, percent) 12.0 12.0 9.5 6.0 8.5 5.5 7.0 5.0 4.5 4.0
Indicative Targets IT IT IT IT IT IT IT
Present value of new external debt (US$ million) 6/ 294 93.5 met 86 0 215 320 436 110 255
Ceiling on domestic debt stock 7/ 270 271.4 281.5 not met 278 307 not met 320 312 328 318 350 341 356 366
Floor on social spending
8/
5.8 5.7 not met 1.7 0.4 not met 3.4 5.1 6.8 7.0 7.0
Memo item:
External concessional borrowing 35.4
Budget grants (US$ million) 349.6 0.0 0.0 0.0 300.3
Sources: Mozambican authorities; and IMF Staff.
1/
Revenue less grants, minus domestically financed primary expenditure (ie. expenditure, less net interest payments and foreign financed investment).
2/
Refer to the TMU for a definition of the evaluation basis of the QPC, the instruments and institutional coverage of public debt for the purposes of evaluation of this PC.
3/
Assessed on a continuous basis.
4/
If the end of period year-on-year headline inflation is outside the upper/lower bound, a formal consultation with the Executive Board as part of program reviews would be triggered.
5/
As noted in paragraph 29 of the TMU, the MPCC also applies through the end of the program period.
6/
This iarget is cumulative from the beginning of each calendar year. In 2022, the ceiling on the present value of new external contracted or guaranteed public debt is based on debt contracted after May 9, 2022.
7/
Includes T-bills, T-Bonds, loans from the Central bank and other direct loans from banks but excludes net transactions with the CB related to the use of the SDR allocation for budget financing.
8/
Social Spending is defined as transfers to INAS (National Institute for Social Action).

Table 2. Mozambique: Prior Actions and Structural Benchmarks for the Program Under the ECF
Arrangement
Measures Macroeconomic objectives Due Dates Status
Prior actions
Incorporation of all public sector servants into the electronic
payroll system (e-folha).
Approval by parliament of amendments to the wage bill law,

Wage bill control
adjusting the percentage of the reference salary, which is applied
to the calculation of the representation subsidy, for statutorily
appointed and elected holders of public office.
Structural Benchmarks
Submit to Parliament an amendment to the Public Probity Law to:
(i) clarify to which individuals the various requirements apply; (ii)
Improve governance and
Governance and strengthen the definition of conflict of interest; (iii) require
strengthen efficiency of End-June 2023
Anti-Corruption submission of declarations of financial interests by new public
public spending.
servants upon hiring; (iv) establish published procedures for
reporting conflicts of interest.
Publication of 2020 and 2021 external audit reports of COVID 19

emergency expenditure, including all findings except for those
End-November 2023
possibly involving financial responsibility (newly proposed
structural benchmark).
Make adequate, accurate and up-to-date information on beneficial

ownership publicly available at the centralized registry (Registro
End-December 2023
das Entidades) in line with the FATF standards (newly proposed
Improve governance,
strengthen revenue
LNG Revenue Submit to Parliament the law on the Sovereign Wealth Fund on mobilization and efficiency
End - Dec 2022 Met
Management LNG resources. of public spending, and
optimize budgetary use of
resource revenue.
Fully implement the elimination of VAT exemptions and zero-

Fiscal Jan. 1 2023 Not met
ratings identified through the 2022 prior action
Establish the quarterly Treasury Budget which will determine limits

on quarterly commitments to be operationalized, and eliminate ex-
End-January, 2023 Met
ante weekly commitment limits in the budget law for 2023 and in Enhance revenue
the corresponding budget execution decree circular. mobilization.
Fully implement in all spending units e-SISTAFE tools for

budgetary planning (annual) and for financial programming End - Dec 2022 Met
(quarterly).

Table 2. Mozambique: Prior Actions and Structural Benchmarks for the Program Under the
ECF Arrangement (concluded)
Measures Macroeconomic objectives Due Dates Status
Include in the 2023 budget document and all implementing

documents the public service hiring limit of one out of three
Fiscal leaving employees except in the sectors of education, health, End-December 2022 Met
justice administration and agriculture. Reduce public debt through
Include in the 2024 budget document and all implementing fiscal consolidation.
documents the public service hiring limit of one out of three
End-December 2023
leaving employees except in the sectors of education, health,
justice administration and agriculture.
Extend the implementation of the new e-tax system (including

filing electronic tax returns and payments) to all taxes and tax
End-December 2023
administration offices. Enhance revenue
mobilization.
Implement the digital interface (Portal do contribute) to allow all Proposed change from
taxpayers to file and pay all taxes electronically. end-December 2023 to
end-March 2024
Approval of Ministerial Regulation (Diploma) to determine the
reference price of extractive industry upon which the tax base is
calculated on the basis of international prices instead of the End-September 2023
current practice of using the firm's last sale price (newly proposed
General audit and "proof of life" of all public sector servants, to be

completed and reported on by the Inspector-General of Finances End - September 2023
(IGF) (newly proposed structural benchmark).
Submit to Council of Ministers an action plan to address the wage Wage bill control
bill overrun consistent with the fiscal consolidation path under the
program and anchor efforts to bring the wage bill to around 10 End-December 2023
percent of GDP over the medium-term (newly proposed structural
benchmark).
Publish the financial risks indicators (as referenced in the MEFP,

¶43) for the complete list of entities comprising the SOEs and other Enhance SOE transparency
End-March 2024
public bodies as published in the CGE Mapa I-06 (newly proposed and strengthen governance
Debt Management The National Directorate for Treasury to prepare weekly cash flow
forecasts extending at least three months ahead to be rolled Enhance cash and debt
End-June 2024
forward at least monthly in line with FAD recommendation (newly management
proposed structural benchmark).

Attachment II. Technical Memorandum of Understanding
1. This Technical Memorandum of Understanding (TMU) spells out the concepts,

definitions, and data reporting procedures mentioned in the Letter of Intent (LOI) and
Memorandum on Economic and Financial Policies (MEFP) of November 4, 2022. It describes
the information requirements to monitor performance under the ECF-supported program. The
authorities will consult with the IMF before modifying measures contained in this TMU or
adopting new measures that would deviate from the goals of the program.
A. Quantitative Performance Criteria (QPC) and Indicative Targets (IT)
2. The quantitative performance criteria listed below are those specified in Table 1 of
the MEFP. Definitions and adjusters (to take into account factors or changes beyond the control
of the Government) for each criterion are specificized in the subsequent sections (B, C, D, and E).
Continuous Quantitative Performance Criteria require that at no point in time will the ceiling be
breached. Unless stated otherwise, all quantitative performance criteria will be assessed
cumulatively from the beginning of the calendar year to the applicable test-dates specified in
Table 1 of the MEFP. The quantitative performance criteria are as follows:
• Floor on domestic primary budget balance (section B).
• Floor on the stock of Net International Reserves (NIR) of the Bank of Mozambique (BM)
(section C).
• A zero ceiling on the accumulation of new public and publicly guaranteed external
payment arrears. (Section D).
• Ceiling on new non-concessional external debt contracted or guaranteed by the public

sector (section E).
3. The indicative targets listed below are those specified in Table 1 of the MEFP.
Definitions and adjusters for each indicative target are specificized in the subsequent sections (F,
G, H). Unless stated otherwise, all indicative targets will be assessed cumulatively from the
beginning of the calendar year to the applicable test-dates specified in Table 1 of the MEFP. The
indicative targets are as follows:
• Ceiling on the present value of new external debt (section F).
• Ceiling on domestic debt (section G).
• Floor on social spending (section H).

B. QPC on the Floor on Domestic Primary Budget Balance
Definition
4. The domestic primary balance is defined as the difference between total

government non-liquified natural gas (LNG) revenue (minus grants) and domestic primary
expenditure.
The above items are defined as follows:
• Unless otherwise indicated, the term Government refers to the central government of
the Republic of Mozambique comprising all the national executive, legislative and judicial
bodies at the central level and central government’s representatives at the local level and
all budget and extrabudgetary public entities such as institutes, funds and agencies
whose competence are included in the definition of central government as defined in the
Government Finance Statistics Manual of 2014 (GFSM 2014), paragraphs 2.85 – 2.89.
• Total government revenue is the sum of tax revenue and non-tax revenue (as defined
in GFSM 2014, Chapter 5) and is recorded on a cash basis. LNG revenue and exceptional
receipts as defined below, will be shown in the breakdown of total government revenue.
For program purposes, LNG revenue will be excluded from total government revenue
and therefore are not part of calculation of domestic primary balance reported in the
quantitative performance criteria in Table 1 of the MEFP.
• Tax revenue. Tax revenues are the sum of revenues from taxes and levies on (i) income,
profits and capital gains, (ii) salaries and labor, (iii) assets, (iv) taxes on goods and
services, (v) foreign trade and international transactions, and other tax revenues. They
correspond to “receitas fiscais”, as reported in the Mapa Fiscal.
• LNG revenues. For the purpose of this TMU, LNG revenues are defined as all revenues
from the LNG sector, including royalties, profit share, CIT, dividends from state’s
participations and all other LNG-related tax or revenues.
• Grants. Grants are defined in paragraph 5.101 of the GFSM 2014. For the purpose of this
TMU, grants consist of project grants and budget grants.
• Total government expenditure is understood to be the sum of expenditure on wages

and salaries of government employees on a gross basis, goods and services, transfers
(including subsidies, grants, social benefits, and other expenses), other current outlays,
interest payments, and capital expenditure. All these categories are recorded on a
commitment basis, unless otherwise stated. Spending items are defined as in GFSM 2014
(Chapter 6).
• Primary expenditure is understood as total government expenditure as defined above

minus interest payments.

• Domestic primary expenditure is understood as primary expenditure minus externally

financed capital expenditure.
• Exceptional receipts are defined as all resources that come from (i) the sale or
placement or privatization of Government’s assets, (ii) taxation on contracts, (iii) granting
or renewal of licenses, (iv) resolution of disputes between foreign companies operating in
Mozambique and the Government in connection with their tax obligations or potential
violations to laws and standards or any other legal obligations, and any other exceptional
receipts.
Adjusters to Domestic Primary Balance
5. The following adjustors will apply to the target on the domestic primary balance.
• If the budget grants or loans are larger than the programmed amount, or in the event of
exceptional receipts (according to Article 4 of the 2022 budget law, the government may
use exceptional resources for investment and emergency spending and debt reduction),
the floor for the domestic primary balance can be adjusted downward by 75 percent of
the excess amount in 2022, 60 percent of the excess amount in 2023, and 50 percent of
the excess amount in 2024. For the purpose of the TMU, baseline budget grants and
budget loans are shown in the Text Table 1.
• In the event of a natural disaster, the floor for the domestic primary balance can be
adjusted downward by up to MTS 3.7 billion drawling on the capital gains Treasury
account (“Mais valías”) at the Central Bank.
• If the authorities sign an agreement to settle the disputed liability, as part of court or
arbitral decisions or as part of out of court settlements with respect to government
guarantees on existing external debt in dispute as of Dec 31, 2022, that result in more
favorable terms to the guarantor than those of the initial debt, the floor for the domestic
primary balance will be adjusted downward by the amount to be settled immediately (in
the same year of signature of the agreement) and recorded as a state-owned enterprise
transfer, per the terms of the signed agreement.
Text Table 1. Baseline Projection of Selected Variables

(In million of US dollars; Cumulative on an annual basis)
End-Mar End-Jun. End-Sep. End-Dec. End-Mar. End-Jun. End-Sep.
2023 2023 2023 2023 2024 2024 2024
Budget Grants and loans 0 0 0 300.27 0 0 150.27
Exceptional Receipts 0 0 0 0 0 0 0

C. QPC on the Floor on the Stock of NIR of the BM
Definition
6. Net international reserves (NIR) of the Bank of Mozambique (BM) are defined,
consistent with the definition of the Template on International Reserves and Foreign
Currency, as external assets readily available to, or controlled by, the BM net of its external
liabilities. Pledged or otherwise encumbered reserve assets (including swaps) are excluded; such
assets include, but are not limited to, reserve assets used as collateral or guarantee for third party
external liabilities. Reserve assets corresponding to undisbursed project accounts are also
considered encumbered assets and are excluded from the measurement of NFA for program
purposes. External liabilities include, inter alia, use of IMF resources.
Calculation of NIR
7. The stock of net official international reserves (NIR) of the BM will be calculated as
the difference between total gross official international reserves and official short-term
reserve liabilities.
• Gross official international reserves are defined as the sum of:
• the BM’s holdings of monetary gold (excluding amounts pledged as collateral);
• holdings of Special Drawing Rights (SDRs);
• BM holdings of convertible currencies in cash or in nonresident financial institutions

(deposits, securities, or other financial instruments); and
• Mozambique’s reserve tranche position with the IMF.
• Gross official usable international reserves exclude:
• pledged, swapped, or any encumbered reserve assets, including but not limited to
reserve assets used as collateral or guarantees for third-party external liabilities (assets
not readily available);
• precious metals other than gold, assets in nonconvertible currencies and illiquid foreign
assets.
• Gross official reserve liabilities are defined as:
• the total outstanding liabilities of the BM to the IMF, excluding the SDR allocations;
• convertible currency liabilities of the BM to nonresidents with an original maturity of up

to and including one year; and

• commitments to sell foreign exchange arising from derivatives (such as futures, forwards,
swaps, and options)
Adjustor to NIR Floor
The QPC (floors) for net international reserves (NIR) will be adjusted:
• downward by any shortfall in budget grants and loans relative to the program baseline
excluding the IMF's budget support.
• downward to accommodate higher external outlays linked to relief from natural disasters.
• upward for any implicit or explicit reimbursement of past public or publicly guaranteed
debt service as a result of refinancing of obligations, such as those related to MAM or
Proindicus.
• If the amount disbursed through project loans and grants and channeled through the
Bank of Mozambique’s FX reserves is higher/lower in U.S. dollar terms than assumed
under the program—as set out in Text Table 2—the floor on the program NIR will be
adjusted upward/downward by the cumulative differences on the test date. These
adjustors will apply to the NIR floor for end-June 2023 and thereafter.
Text Table 2. Cumulative Project Financing Channeled Through the Bank of

Mozambique
(Million USD)
Actual Projected
End-March 2023 End-June 2023 End-Sep 3023 End-Dec 2023 End-March 2024 End-June 2024
54 234 319 625 97 234
Note: These inflows are recorded monthly by the BM in the cash flow table under “2.3. Estado (Entradas para Projectos)”
together with IMF disbursements.
8. NIR is monitored in U.S. dollars, and, for program monitoring purposes, assets and
liabilities in currencies other than the U.S. dollar shall be converted into dollar equivalent values,
using the exchange rates or source as specified in the text Table 3.
Text Table 3. Program Exchange Rates

(Currency unit per US dollar)
SDR 0.723999
EUR 1.1044
JPY 119.17
CNY 6.3609
INR 76.03
KRW 1212.2
Source: March 18, IMF and Federal Reserves
http://www.federalreserve.gov/releases/h10/current/default.htm.
http://www.imf.org/extenral/np/data/ms_five.aspx

D. QPC on a Zero Ceiling on the Accumulation of New Public and

Publicly Guaranteed External Payment Arrears
Definition
9. Definition and coverage of public and publicly-guaranteed external debt is

provided in section E.
10. External payment arrears are defined as the difference between the amounts
required to be paid under the contract or legal document and the amount actually paid after
the payment deadline, including any grace period, specified in the pertinent contract.
11. The government’s external payment arrears include all external debt service
obligations (principal and interest) matured and unpaid deriving from loans arranged or
guaranteed by the central government, penalties, and interest charges deriving from
these loans not paid at maturity. For performance criteria requirements, external debt service
obligations matured and unpaid after 30 days will be considered “program” arrears. The
definition excludes arrears relating to debt subject to renegotiation (dispute or ongoing
renegotiation) or rescheduling. External debt is defined on a currency basis.
12. The performance criterion on the public and publicly-guaranteed external payment
arrears is defined as a cumulative flow in gross terms from May 9, 2022 and applies on a
continuous basis.
E. QPC on the Ceiling on New Non-Concessional External Debt

Contracted or Guaranteed by the Public Sector
Definition of Debt Ceiling
13. A performance criterion (ceiling) applies to the present value (PV) of new external
non-concessional debt contracted or guaranteed by the public sector. The ceiling applies
also to debt contracted or guaranteed for which value has not yet been received. Operations
that resolve arrears to Angola, Bulgaria, Iraq, Libya, and Poland and result in reduction in
outstanding stock of debt are excluded from the ceiling. Court or arbitral decisions and related
debt operations with respect to government guarantees on existing external debt in dispute as
of Dec 31, 2022, that result in more favorable terms to the guarantor than those of the initial
debt, will be excluded from the ceiling. 1 Debt operations that restructure existing loans and that
result in a reduction of the present value (present value savings) compared with the initial debt
and/or an improvement of the overall public external debt service profile will be excluded from
the ceiling. In the calculation of the present value savings for these debt operations, the
discounted future stream of payments of debt service due on the newly issued debt instrument
(including all costs associated with the operation) will be compared with the discounted future
1
The latter is a change from the time of program approval.

stream of debt service due on the instrument it replaces using a discount rate of 5 percent and
these amounts will not be capped by the nominal value of the debt. The company Hidroeléctrica
de Cahora Bassa (HCB) is excluded from this criterion. HCB meets the criteria for exclusion set
out in the 2017 Staff Guidance Note on the Debt Sustainability Framework for LICs (Appendix III)
because it is run on commercial terms, has good financial performance, enjoys managerial
independence, and borrows without government guarantee.
Definition of Debt
14. For program purposes, the definition of debt is set out in paragraph 8(a) of the
Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive
Board Decision No. 15688-(14/107), adopted December 5, 2014.
15. The term “debt”2 is understood to mean a current, that is, not contingent, liability,
1
created under a contractual arrangement through the provision of value in the form of
assets (including currency) or services, and which requires the obligor to make one or more
payments in the form of assets (including currency) or services, at some future point(s) in time;
these payments will discharge the principal and/or interest liabilities incurred under the
contract. Debt can take several forms; the primary ones being as follows:
i. loans, that is, advances of money to the obligor by the lender made on the basis of an
undertaking that the obligor will repay the funds in the future (including deposits, bonds,
debentures, commercial loans, and buyers’ credits) and temporary exchange of assets
that are equivalent to fully collateralized loans, under which the obligor is required to
repay the loan funds, and usually pay interest, by repurchasing the collateral from the
buyer in the future (such as repurchase agreements and official swap arrangements);
ii. suppliers’ credits, that is, contracts where the supplier permits the obligor to defer
payments until sometime after the date on which the goods are delivered or services are
provided; and
iii. lease agreements (classified as debt until 2021 and then reclassified as goods and
services from 2022, based on recommendations from the IMF Statistics department), that
is, arrangements under which the lessee is allowed to use a property for a duration
usually shorter than that of the life of the property in question, but without transfer of
ownership, while the lessor retains the title to the property. For the purposes of this
guideline, the debt is the present value (at the inception of the lease) of all the lease
payments expected for the period of the agreement, except payments necessary for the
operation, repair, and maintenance of the property.
16. In accordance with the definition of debt set out above, arrears, penalties and
judicially awarded damages arising from failure to pay under a contractual obligation that
21Guidelines on Public Debt Conditionality in IMF-Supported Programs.

constitutes debt are also debt. Failure to make payment on an obligation that is not considered
debt under this definition (e.g., payment on delivery) will not give rise to debt.
Coverage of Debt
17. For the purposes of this debt limit ceiling, public sector debt covers public and
publicly guaranteed debt. The public sector comprises the central government, the central
bank, and Empresa Nacional de Hidrocarbonetos (ENH). The government’s control of an entity
will be assessed according to the methodology defined in GFSM 2014, Chapter 2.
18. For program purposes, a ‘guaranteed debt’ is an explicit promise by the public
sector to pay or service a third-party obligation (involving payments in cash or in kind).
• Public sector external debt includes foreign-currency denominated obligations of the

National Government of Mozambique, and foreign-currency denominated obligations of
the Central Bank of Mozambique contracted on behalf of the national government
(excluding newly contracted financing from the IMF and the General SDR allocation).
• The definition of debt is presented in the above sub-section, with the exception noted in
the previous bullet.
Contracting of Debt and Treatment of Credit Lines
19. For program purposes, a debt is considered to be contracted when all conditions
for its entry into effect have been met, including approval by the Council of Ministers.
Contracting of credit lines (which can be drawn at any time and entered into effect) with no
predetermined disbursement schedules or with multiple disbursements will be also considered as
contracting of debt.
Present Value Calculation and Concessionality
20. For the purposes of the ceiling on the contracting or guaranteeing of new external
non-concessional debt, a debt is concessional if it includes a grant element of at least
35 percent, calculated as follows: the grant element of a debt is the difference between the
present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value
of the debt. The PV of debt at the time of its contracting is calculated by discounting the future
stream of payments of debt service due on this debt.3 For debts with a grant element equal or
2
below zero, the PV will be set equal to the nominal value of the debt. The discount rate used for
this purpose is the unified discount rate of 5 percent set forth in Executive Board Decision No.
15248-(13/97).
21. The grant element of external debts in currencies other than the U.S. dollar will be
calculated in U.S. dollar terms at program exchange rates. For any debt carrying a variable
32Thecalculation of concessionality takes into account all aspects of the debt agreement, including maturity,
grace period, payment schedule, upfront commissions, and management fees.

interest rate in the form of a benchmark interest rate plus a fixed spread, the PV of the debt
would be calculated using a program reference rate plus the fixed spread (in basis points)
specified in the debt contract. The program reference rate for the six-month USD SOFR is 1.52
percent and will remain fixed for the duration of the program. The spread of six-month Euro
EURIBOR over six-month USD SOFR is -200 basis points. The spread of six-month JPY OIS over
six-month USD SOFR is -150 points. The spread of six-month GBP SONIA over six-month USD
SOFR is -100 basis point. For interest rates on currencies other than Euro, JPY, and GBP, the
spread over six-month USD SOFR is -100 basis points. Where the variable rate is linked to a
benchmark interest rate other than the six-month USD SOFR, a spread reflecting the difference
between the benchmark rate and the six-month USD SOFR (rounded to the nearest 50 basis
points) will be added.
External Debt
22. For the purposes of the ceiling on the contracting or guaranteeing of new external
debt, external debt is any debt contracted or guaranteed by the public sector on non-
concessional terms denominated in foreign currency, i.e., currency other than the Metical.
External debts in currencies other than the U.S. dollar will be converted in U.S. dollars at program
exchange rates (Text Table 3).
F. IT on the Present Value of New External Debt
23. An indicative target (ceiling) applies to the PV of new external debt contracted or
guaranteed by the public sector, as defined in paragraphs 14–16. The ceiling applies also to
debt contracted or guaranteed for which value has not yet been received. Operations that
resolve arrears to Angola, Bulgaria, Iraq, Libya, and Poland and result in reduction in outstanding
stock of debt are excluded from the ceiling. Court or arbitral decisions and related debt
operations with respect to government guarantees on existing external debt in dispute as of Dec
31, 2022, that result in more favorable terms to the guarantor than those of the initial debt, will
be excluded from the ceiling. Debt operations that restructure existing loans and that result in a
reduction of the present value (present value savings) compared with the initial debt and/or an
improvement of the overall public external debt service profile will be excluded from the ceiling.
In the calculation of the present value savings for these debt operations, the discounted future
stream of payments of debt service due on the newly issued debt instrument (including all costs
associated with the operation) will be compared with the discounted future stream of debt
service due on the instrument it replaces using a discount rate of 5 percent and these amounts
will not be capped by the nominal value of the debt.
G. IT on the Ceiling on Domestic Debt
Definition
24. For the purpose of this TMU, domestic debt is defined as provided in Mapa da
Divida, covering T-bills, T-bonds, loans from the Bank of Mozambique excluding onlending

from the additional SDR allocation received in August 2021 (MT 20.5 billion), and “Other”
(“Outros”).
25. The indicative target (ceiling) applies to the nominal value of domestic debt by the
central government denominated in metical. Newly issued domestic debt as part of debt
operations related to court or arbitral decisions or as part of out of court settlements concerning
government guarantee on existing external debt in dispute as of December 31, 2022, that result
in more favorable terms to the guarantor than those of the initial debt, will be excluded from the
ceiling. Data on domestic debt will be reported and communicated to the IMF in the “Mapa de
divida interna” prepared by the MEF and in the weekly and monthly data received from the BM.
Adjustors to the IT Domestic Debt
26. The following adjustors will apply to the target on domestic debt:
• If the budget grants or loans are lower than the programmed amount, the ceiling on the
stock of domestic debt will be adjusted upward by the amount of the shortfall. For the
purpose of the TMU, baseline budget grants and budget loans are shown in the Text
Table 1.
• The ceiling on the stock of domestic debt will be adjusted upwards by the amount of
MT 35 billion of securitized VAT arrears to be repaid by the Treasury.
H. IT on the Floor on Social Spending
Definition
27. For the purpose of this TMU, social spending is defined as transfers to INAS43 from
the budget (through the treasury single account, i.e., not including transfers to INAS
through project grants or project loans from external partners). The IT is on the execution
on budget spending (rather than allocation).
43Instituto Nacional de Acçao Social.

Adjustors to the IT on Social Spending
28. The following adjustor will apply to the indicative target on social spending.
• Should expenditure compression be needed, social spending would be adjusted to the

extent that it is reduced proportionally less than other domestically financed primary
spending such that its ratio increases compared to the previous year.
I. Monetary Policy Consultation Clause (MPCC)
29. The authorities will complete a consultation with the Executive Board which would
focus on: (i) the stance of monetary policy and whether the Fund-supported program remains
on track; (ii) the reasons for program deviation, taking into account compensating factors; and
(iii) proposed remedial actions if deemed necessary, if the end-of-period year-on-year headline
3-city (“MABENA”) inflation falls outside the:
• ±3 percentage point range around the 9.0 percent mid-point target band value for end-
June 2023, 8.5 percent for end-September 2023, or 8.0 percent for end-December 2023.
• ±3 percentage point range around the 7.5 percent mid-point target band value for end-
March 2024, 7.0 percent for end-June 2024.
J. Structural Benchmarks and Prior Actions
30. Prior Actions are specified in Table 2 of the MEFP.
• Incorporating all public servants into the electronic payroll system (e-folha).
31. Parliament approval of amendments to the wage bill law, adjusting the percentage of the
reference salary, which is applied to the calculation of the representation subsidy, for statutorily
appointed and elected holders of public office. Structural benchmarks are specified in Table 2
of the MEFP.
• Submit to Parliament an amendment to the Public Probity Law to: (i) clarify to which
individuals the various requirements apply; (ii) strengthen the definition of conflict of
interest; (iii) require submission of declarations of financial interests by new public
servants upon hiring; (iv) establish published procedures for reporting conflicts of
interest, by end-June 2023.
• Submit to Parliament the law on the Sovereign Wealth Fund on LNG resources by end-
December 2022.
• Fully implement the elimination of VAT exemptions and zero-ratings identified through
the 2022 prior action by (i) adopting the revised VAT law and (ii) making effective the
implementation decree to the VAT law by January 1, 2023.

• Include in the 2023 and 2024 budget documents the public service hiring limit of one out
of three leaving employees except in the sectors of education, health, justice
administration, and agriculture.
• Fully extend the implementation of e-tributação to all taxes and tax offices by end-2023.
• Implement the digital interface (Portal do contribuinte) to allow all taxpayers to file and
pay all taxes electronically by end-June 2023.
• Fully implement in all spending units e-SISTAFE tools, Orçamento de Tesouraria for
budgetary planning (annual) and Plano de Tesouraria for financial programming
(quarterly) by end-December 2022.
• Through the applicable budget execution circular to be issued for management of the
2023 budget, implement the establishment of ex-ante quarterly commitment limits for all
expenditure units. These limits will allow all expenditure units to record expenditure
transactions in real time and issue commitment notes in e-SISTAFE. The cash
management committee will establish the quarterly Treasury Budget which will determine
limits on quarterly commitments to be operationalized in
e-SISTAFE and eliminate the operation of ex-ante weekly commitment limits for 2023.
(Proposed modified structural benchmark for January 2023).
K. Reporting Procedures to the IMF
32. Data on all the variables subject to quantitative performance criteria and indicative
targets and information on the progress towards meeting structural benchmarks will be
transmitted regularly to the IMF in accordance with the table shown in Attachment 1
herewith. For the purpose of this TMU, days refer to calendar days unless otherwise specified.
Revisions to data will also be forwarded to the IMF within 5 days after being made. In addition,
the authorities will transmit to IMF staff any information or data not defined in this TMU but
pertinent for assessing or monitoring performance relative to the program objectives.
33. Fiscal data. Fiscal data are reported in the following documents.
• Mapa Fiscal
34. Debt Data. Debt data are reported in the following documents.
Domestic Debt
• Mapa de divida
• Mapa de projeçao de divida interna

External Debt
• Mozambique External Loans Government Guaranteed Public Debt Having DOD

Outstanding For Year Ending (each year)
• External Debt Service Projection by creditor and project
• Tabela 8a and Tabela 8b
• Newly contracted debt terms (as per the IMF tool on the PV of new debt).
35. ENH data.
• ENH (through MEF) will provide quarterly updates for all LNG projects debt data ahead of
each quarterly deadline on: (i) actual and projected carry disbursements or balance,
broken down by carry agreement and creditor, (ii) interest accumulated, and (iii)
modifications to terms or relief granted (for example, a delay in interest accumulation),
(iv) balance on the State guarantee according to the debt drawdown (Area 1), and (vi)
revisions to capex and project costs. ENH will inform the IMF of new debt negotiations,
and provide term details once these negotiations are completed.
• For the projects under production phase ENH data will be expected quarterly on: (i)
actual and projected production quantities, (ii) actual and projected prices, and (iii) actual
and projected operating costs.

Table 1. Mozambique: Summary of Data to be Reported
Data Provider Periodicity and Target Date
Inflation
CPI INE Monthly, 10 days after the
end of the month
2. Fiscal data
Mapa Fiscal MEF Monthly, 50 days after the
end of the month
Total government revenue and expenditure as defined in MEF Monthly, 30 days after the
paragraph 4 of the TMU end of the month
Total compensation to all public sector employees and MEF Monthly, 30 days after the
breakdown by sector per the template prepared by IMF end of the month
staff
Table with social transfers to INAS MEF Quarterly, 50 days after the
end of the quarter
3. Public debt
Mapa de Divida, which includes the stock of Treasury MEF Quarterly, 30 days after the
Bills and Bonds, debt from the central bank and other end of the quarter
domestic debt “outros”, including the quarterly Mapa 1-
3 (MOVIMENTO DA DÍVIDA PÚBLICA POR GRUPO DE
CREDORES)
Mapa de projeçao de divida interna MEF Quarterly, 50 days after the
end of the quarter
Total new contracted or guaranteed external project MEF Data will be provided to the
loans (concessional and non-concessional). IMF on a continuous basis
Total other new contracted or guaranteed external MEF Quarterly. Within 50 days
concessional debt after the end of the quarter
MEF Data will be provided to the
Total new Eurobond issuances IMF on a continuous basis
Total new other non-concessional external debt MEF Quarterly. Within 50 days
contracted or guaranteed after the end of the quarter
Change in external arrears, including interest and principal, Data will be provided to the
and penalties IMF on a continuous basis.
BM Monthly, 30 days after end of
4. Gross Reserves (in US$ million) month
Monetary Gold month
Foreign Currency Included in Official Reserve Assets month
Transf. Dep. Included in Official Reserve Assets FC month
Other Dep. Multilateral Payment Agreements FC month
Other Dep. Included in Official Reserve Assets Other FC month

Table 1. Mozambique: Summary of Data to be Reported (continued)

Securities Included in Official Reserve Assets FC month
Repos Nonresidents Included in Official Reserve Assets FC month
Other Loans Nonresidents Included in Official Reserve BM Monthly, 30 days after end of
Assets FC month
Shares Included in Official Reserve Assets FC month
Financial Derivatives Included in Official Reserve Assets FC month
Net international reserves at program exchange rates BM Monthly, 30 days after end of
as specified in text Table 3 month
FUND ACCOUNTS month
Reserve Position in the Fund, IMF Record month
SDR Holdings, IMF Record month
Short-term foreign liabilities month
Transf. Dep. Excl. Nonresidents Short-Term FC month
Other Dep. Excl. Multilateral Payment Agreements FC month
Other Dep. Excl. Nonresidents Short-Term Other FC month
Securities Excl. Nonresidents Short-Term FC month
Repos Nonresidents Short-Term FC month
Other Loans Nonresidents Short-Term FC month
Financial Derivatives Nonresidents Short-Term FC month
Of which: Liabilities to IMF month
Use of Fund Credit & Loans, IMF Record month
External cash flow
External cash flow to compute international reserves BM Monthly, 40 days after end of
(Reservas Internacionais Liquidas) month
5. LNG debt
Actual and projected carry disbursements or balance, ENH/MEF Quarterly. Within 20 days
broken down by carry agreement and creditor. after the end of the quarter.

Table 1. Mozambique: Summary of Data to be Reported (concluded)
ENH/MEF Quarterly. Within 20 days

Interest accumulated. after the end of the quarter.
Modifications to terms or relief granted (for example, a ENH/MEF Quarterly. Within 20 days
delay in interest accumulation). after the end of the quarter.
Balance on the State guarantee according to the debt ENH/MEF Quarterly. Within 20 days
drawdown (Area 1). after the end of the quarter.
ENH/MEF Quarterly. Within 20 days
Revisions to capex and project costs. after the end of the quarter.
Inform IMF of negotiations for new debt (terms to be ENH/MEF Quarterly. Within 20 days
provided once negotiations are completed). after the end of the quarter.
6. LNG production
ENH Quarterly. Within 20 days
Actual and projected production quantities. after the end of the quarter.
Actual and projected prices. after the end of the quarter.
Actual and projected operating costs. after the end of the quarter.

SECOND REVIEW UNDER THE THREE-YEAR ARRANGEMENT
June 21, 2023 UNDER THE EXTENDED CREDIT FACILITY, REQUESTS FOR
MODIFICATION OF THE MONETARY POLICY CONSULTATION
CLAUSE, WAIVERS OF NONOBSERVANCE FOR QUANTITATIVE
PERFORMANCE CRITERIA, AND FINANCING ASSURANCES
REVIEW—DEBT SUSTAINABILITY ANALYSIS
Approved By Prepared by the staffs of the International Monetary Fund

Andrea Richter Hume and the World Bank.
(IMF, AFR); Boileau Loko
(IMF, SPR); Asad Aslam;
Manuela Francisco (WB)
The assessment is unchanged from the DSA at Mozambique: Risk Rating Summary
program approval in 2022. Overall and Joint Bank-Fund Debt Sustainability Analysis
external public debt are assessed to be at high Risk of External debt distress: High
risk of distress due to some indicators Overall risk of debt distress High
remaining above sustainability thresholds for
Granularity in the risk rating Sustainable
some years under the baseline, and the
Application of judgment No
vulnerability of debt to downside risks during
this period. 1 Public debt is assessed as sustainable in a forward-looking sense because a large
share of projected future borrowing reflects the state’s participation in large LNG projects, which
will be repaid directly from future LNG revenues (which are expected to be significant). The PV of
external debt-to-GDP and the public debt-to-GDP ratio reach the threshold one year later than
the 2022 DSA, on account of fiscal slippages related to public wage bill reform. Risks are tilted to
the downside, reflecting vulnerability to natural disasters, intensification of terrorist activity in the
North (which could jeopardize onshore LNG projects), and deepening geo-economic
fragmentation. On the upside, assumptions underlying the DSA are conservative, as growth
projections do not incorporate potential spillovers from LNG projects to the broader economy. In
addition, external debt is mostly concessional, and debt contracted for LNG development will be
entirely repaid from LNG revenue, once production starts.
1
Mozambique’s debt carrying capacity is assessed as “weak” based on a compositor indicator value of 2.62.
This assessment is based on the World Economic Outlook, April 2023 and the 2021 Country Policy and
Institutional Assessment.

PUBLIC DEBT COVERAGE

1. The coverage of public and publicly guaranteed debt is the same as in the program
DSA (Text Table 1). The analysis covers external and domestic obligations of the central government,
including on-lending to SOEs. The authorities provide data on debt of state-owned enterprises
(SOEs) and guarantees provided by the central government on debt contracted by SOEs. Most of
SOE guarantees relates to the state energy company—Empresa Nacional de Hidrocarbonetos
(ENH)—which is involved in the LNG exploitation. SOE domestic debt is included, while non-ENH
SOE direct external debt is not included. Domestic debt is denominated in local currency and, for the
purposes of the analysis, is assessed by currency, as data capturing the residency of creditors are not
available. The contingent liabilities stress test assumes realization of contingencies linked to the
disputed government guarantees on commercial loans (around 7.5 percent of GDP), 2 debt
contracted by municipalities, and non-ENH SOE external debt are realized. 3 For the latter two
contingencies, the contingency is estimated to be slightly above the default amount (at 3 percent in
total) based on available information. 4
Text Table 1. Mozambique: Public Debt Coverage and Design Stress Tests of Contingent
Liability
Public sector coverage
Subsectors of the public sector Sub-sectors covered
1 Central government X
2 State and local government
3 Other elements in the general government
4 o/w: Social security fund
5 o/w: Extra budgetary funds (EBFs)
6 Guarantees (to other entities in the public and private sector, including to SOEs) X
7 Central bank (borrowed on behalf of the government) X
8 Non-guaranteed SOE debt X
Definition of contingent liabilities

1 The country's coverage of public debt The central government, central bank, government-guaranteed debt, non-guaranteed SOE debt
Default Used for Reasons for deviations from the default settings
the
analysis
2 Other elements of the general government not captured in 1. 1.5 percent of GDP 1.5 Municipalities debt
3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 9 Disputed sovereign guarantee arrears (7.5) + non-ENH SOE
direct external debt (1.5)
4 PPP 35 percent of PPP stock 3.27

5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5
Total (2+3+4+5) (in percent of GDP) 18.8
1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already
included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.
2
The government of Mozambique is disputing its liability for state guarantee of loans extended to the two SOEs
MAM and Proindicus in the context of the broader “undisclosed debt” scandal. The Mozambican state and Credit
Suisse are suing each other, and are both being sued by investors in the UK. The “undisclosed debts” are related to
loans worth US $ 2.2 billion contracted between 2013 and 2014 from the British branches of investment banks Credit
Suisse and VTB by Mozambican state-owned companies Proindicus, Ematum, and MAM.
3
Direct external debt includes debt contracted by TMCel (telecom company), Petromoc (fuel importer), EMEM
(mining company), EDM (electricity company) and BNI (Banco National de Investimento). It is not included because
there is no information on future disbursements for this debt.
4
Municipalities debt is not currently systematically collected by the authorities. Most of this debt is short-term, to
address liquidity needs within the year, and municipalities are required to obtain authorization from the Minister of
Finance before contracting longer-term debt.

BACKGROUND
A. Recent Economic and Debt Developments
2. A recovery is underway led by agriculture, services, and offshore LNG production

(Coral platform). Growth accelerated from 2.4 percent in 2021 to 4.2 percent in 2022 led by
acceleration across most sectors. The offshore LNG platform was delivered and started production at
end-2022. Exports made a strong recovery (growing by 48 percent), in particular coal, intermediate
goods, and electricity. Imports also increased both due to the LNG offshore platform import in early
2022, and non-megaproject imports. Reserves declined in 2022, with an acceleration in the second
half of the year as the Bank of Mozambique (BM) provided FX to fuel importers, amid rising energy
prices. The current account excluding “megaprojects” remains in structural deficit. Fiscal
performance deteriorated significantly in 2022, with a primary deficit after grants reaching 2 percent
of GDP, compared to projections at the start of the program at 0.2 percent of GDP.
3. With regards to onshore LNG development, Totalenergies—the lead member of the

consortium for Area 1—has not yet announced a resumption date for its onshore LNG project.
Following terrorist attacks in 2021, Totalenergies declared force majeure and suspended activity until
“security and stability have been restored in a sustainable manner”. The company has reiterated its
long-term commitment to the project, in which it has substantial sunk costs from purchasing the
concession and initial investments, with the project about one third of the way to completion.
A second onshore LNG project led by ExxonMobil has not yet reached Final Investment Decision.
4. While domestic borrowing increased in 2022, GDP growth helped reduce total debt to
GDP ratio. External public debt is estimated at 71.1 percent of GDP at end-2022, down from 81.2,
explained by a decrease in the nominal amount of external debt due to net repayments, higher
growth and favorable exchange rate movements. ENH equity debt on Golfinho increased due to
capitalized interests, as well as additional costs incurred for local socio-economic development
activities around the project, and other costs related to maintaining the current infrastructures
(security, storage, etc.). Domestic debt is estimated to have risen to about 24.5 percent of GDP, partly
due to the unexpected additional cost of the wage bill reform and a shortfall in revenues. The share
of short-term debt in the total is about 15 percent, consistent with the Medium-term Debt Strategy
(¶11). Public external debt is largely concessional, owed to multilaterals and bilateral donors (Text
Table 2, Table 5). New multilateral debt disbursement came from the new IMF program in 2022, and
existing project loans. Overall, multilateral debt level stayed unchanged between 2021 and 2022.
Bilateral nominal debt decreased slightly. The program with the IMF catalyzed financing from the
World Bank through a DPF worth $284.9 million in grants in October 2022 and a budget grant of
$42.8 million by the EU. Mozambique does not have market access, and external commercial
borrowing is precluded under the IMF-supported program.

Text Table 2. Mozambique: Debt, Public and Publicly Guaranteed

(Percent of GDP)
2014 2015 2016 2017 2018 2019 2020 2021 2022

Prel.
Public Sector Debt 64.3 87.4 126.2 104.1 106.7 99.0 120.0 104.9 95.5
Public Sector External Debt (Incl. Guarantees) 58.1 76.6 103.6 83.8 86.2 79.4 97.8 81.2 71.1
A. Bank of Mozambique-IMF 1.1 1.8 2.0 1.3 1.0 1.4 4.0 3.0 3.1
B. General Government 47.5 63.6 89.4 72.3 74.5 73.1 92.8 77.4 67.0
Multilateral creditors, excl IMF 19.9 26.2 35.9 29.3 29.6 27.1 32.9 27.7 23.2
Bilateral creditors 19.9 28.6 39.0 32.2 32.7 29.3 34.0 27.2 21.6
Paris Club 3.1 4.7 7.1 7.1 8.1 7.2 8.7 6.4 5.3
China (incl. EXIMBANK of China) 8.3 11.3 16.1 14.2 14.7 12.9 14.8 12.0 9.0
Portugal 2.9 5.4 6.0 4.9 4.1 3.6 3.7 3.1 2.5
Pre-HIPC loans1/ 3.5 4.2 5.6 4.2 4.0 3.8 4.5 3.6 3.3
Banks 3.0 3.0 6.9 5.1 5.0 5.7 6.9 5.5 4.7
EMATUM/Mozam Eurobond 3.0 3.0 6.9 5.1 5.0 5.7 6.9 5.5 4.7
Other public sector: ENH (LNG project) 4.6 5.7 7.6 5.7 7.1 10.9 19.1 17.1 17.4
C. Government guaranteed external debt 9.5 11.2 11.2 8.2 8.0 3.9 0.5 0.3 0.3
EMATUM 2.1 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Proindicus 3.8 4.5 6.2 4.7 4.7 0.0 0.0 0.0 0.0
MAM 3.2 3.9 5.5 4.3 4.3 4.1 0.0 0.0 0.0
ENH 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.2
Other guarantees 0.4 0.4 0.4 0.3 0.2 0.2 0.2 0.1 0.0
D. External arrears 0.0 0.0 1.0 1.9 2.7 1.0 0.5 0.5 0.7
Public Sector Domestic Debt (Incl. Guarantees) 6.3 10.9 22.6 20.3 20.5 19.6 22.1 23.7 24.5
Memo item: disputed external arrears (not included in debt

stock) 2/ 0.0 0.0 0.0 0.0 0.0 4.4 10.2 8.1 7.0
1/ Stock of debt owed to Angola, Bulgaria, Iraq, Libya, Poland. These loans are not being repaid; debt stock interest and late interest
(penalty) accruing on unresolved arrears are not added to the debt stock; negotiations are ongoing and, although initial stock of debt
is reported here, HIPC terms are expected to be used, in line with PC representative agreement.
2/ Proindicus and MAM are in dispute.
6. Mozambique has reached agreements on some of its defaulted external loans and is
actively seeking resolution of the remaining ones. The overall stock of external arrears on public
and publicly guaranteed external debt service is estimated at US$1.9 billion at end-2022 (Text Table
3). Mozambique accrued some debt service arrears to Portugal and Spain at the end of 2022 due to
administrative difficulties in processing the payments, and with the Islamic Development Bank in
early 2023 linked to constraints in meeting a bunching of domestic and external debt service
payments. All arrears have been resolved. The loans contracted by Proindicus and Mozambique
Asset Management (MAM), which have disputed government guarantees, are not included in the
baseline and are instead treated as contingent liabilities in accordance with IMF policy (Text Table 3).
Mozambique has reached an agreement on an actualized amount for its arrears with Brazil and a
repayment plan. While the plan is pending ratification by the Brazilian parliament yet, the MOU
remains valid since it accounted for such potential delays.5 Pre-HIPC Non-Paris Club arrears have
a representative agreement in place. Mozambique has been in contact with the authorities of the
five countries with which it still holds pre-HIPC arrears. They updated the reconciled amount on the
arrears with Angola, and recently reached an understanding on a reconciled amount and repayment
plan with Libya on its pre-HIPC loan. The understanding with Libya involves a haircut on
accumulated interest, and debt service that is non-concessional. These terms are less favorable than
5
The reconciled amount, which is technically still in arrears as long as the MoU is not ratified, is below 1 percent of
GDP and constitutes a de minimis case as per the guidance on Bank-Fund DSAs.

the terms covered by the HIPC agreement and lead to an increase in NPV, and no significant change
in the debt sustainability assessment.
B. Macroeconomic Forecasts
7. The onshore LNG project led by TotalEnergies is assumed to resume development in

2023. In view of the security improvement in the North, TotalEnergies published in May an
assessment of the human rights situation and an action plan establishing a foundation for local
socio-economic development. They have not announced the official resumption of the development
phase. Once such decision is taken, the remobilization is expected to take about six months. It is
therefore assumed that exports for the TotalEnergies and ExxonMobil projects will commence in
2027 and 2029 respectively, a year later than in the previous DSA. Meanwhile, the ENI-led Coral
FLNG project, which started production in end-2022, is assumed to reach full-capacity in July.
Government revenues will be small at first—under 0.1 percent of GDP in 2023—and are projected to
reach 0.8 percent of GDP in 2027 when the first onshore project starts production. 6 First repayments
for ENH’s equity debt for Area 4 exploration and development will start in 2023 from its Coral South
cash flow share (see Box 1 for details).
Text Table 3. Mozambique: Evolution of the Stock of External Arrears

(Millions of U.S. dollars)1
End-2017 End-2018 End-2019 End-2020 End-2021 End-2022
Commercial Debt 876.4 1241.1 1337.6 1337.6 1337.6 1337.6
Mozam/ EMATUM 97.9 174.2 - - - -
MAM 2 343.1 499.1 644.0 644.0 644.0 644.0
2
Proindicus 435.5 567.8 693.6 693.6 693.6 693.6
Bilateral Debt 116.8 207.3 295.3 380.7 463.6 594.9
3
Paris Club: Brazil 22.9 37.7 51.9 65.6 78.9 142.5
Non-Paris Club 4 93.9 169.7 243.4 315.1 384.8 452.3
Total 993.2 1448.4 1632.9 1718.4 1801.3 1932.5
1
Staff estimates based on information received by the authorities on their debt strategy. Contractual penalty fees or rates
have not been included.
2
Arrears are in dispute since 2020 for MAM and 2019 for Proindicus.
3
3
An MOU agreeing on a reconciled amount and a debt service path has been signed in 2022 and is awaiting Brazilian's
Parliament approval. The reconciled amount is entered as a new loan in the DSA.
4
Data reported by the authorities for Libya, Iraq, Angola, Poland and Bulgaria lack of debt servicing. The initial loan
amounts are included in the debt stock in the DSA.
8. The medium-term growth outlook is positive. Growth is projected to strengthen to

7 percent in 2023, mostly due to LNG. Long-term non-LNG growth is estimated at 4 percent,
assuming no positive spillovers from LNG to the rest of the economy, and substantially below
growth rates observed prior to the “undisclosed debts” scandal. It is driven primarily by a large and
growing contribution from services and a large, although shrinking, contribution from agriculture.
The negative impact on growth from fiscal consolidation is expected to be compensated by the
stimulating impact of higher public sector wages and looser monetary policy as the policy mix
becomes more balanced. Overall growth is expected to accelerate sharply to 13.2 percent in 2027
6
Government revenue streams from the first LNG project has started in the form of a royalty as well as a share of
profit oil. Once the investing companies have recouped costs, they will also start paying corporate income tax.

and 12.1 percent in 2028 as the first onshore project begins production. Inflation is projected to be
higher than in the May 2022 DSA due to (i) higher realized inflation over past months, as well as
(ii) an upward revision of projected inflation, due to both domestic and global factors, in particular
the relaxation of COVID-related restrictions in Mozambique, global supply-chain shocks, and the war
in Ukraine. At the same time, inflation is expected to decline over the short and medium term amid
tight domestic monetary policy.
9. External sector dynamics are dominated by the LNG projects development.

Mozambique’s external position in 2022 was substantially weaker than the level implied by
fundamentals and desirable policies. The non-megaproject current account is dominated by goods
imports that are not fully matched by exports and grants. The investments related to megaprojects
are fully financed through FDI inflows. The medium-term current account is expected to show a
large total deficit linked to the LNG investment projects, while the non-megaproject current account
deficits are projected to improve over the medium term as structural reforms to promote
diversification bear fruit. Government policies to improve infrastructure and increase productivity in
the agricultural sector will be crucial to enhance competitiveness and foster non-megaprojects
exports. Measures to foster human capital development and improve the business environment
could encourage inclusive and resilient growth, Text Table 4. Mozambique: Projected
and productivity improvements. The external External Borrowing Program, January 1,
position is expected to strengthen over the long 2023 to June 30, 2024
term as LNG production and exports rise. 7 PPG External Debt
PV of New Debt 1/
USD million Percent
10. International reserves are projected to By Sources of Debt Financing 691 100
rebound over the medium term. In addition to Concessional debt, of which 2/ 691 100
the tight monetary stance and raising reserve Multilateral debt 394 57
Bilateral debt 297 43
requirements on commercial banks’ FX deposits Other 0 0
from 11.5 percent to 28.5 percent (February Non-concessional debt, of which 0 0
Semi-concessional 3/ 0 0
2023) and to 39.5 in May, the BM reduced its Commercial terms 4/ 0 0
provision of FX to fuel importers from 100
percent to 60 percent of the fuel import bill in By Creditor Type 691 100
Multilateral 394 57
April 2023, and removed it completely in June. Bilateral - Paris Club 197 29
Fiscal consolidation and the ramp up in LNG Bilateral - Non-Paris Club 100 14
Other 0 0
revenue should also reduce pressure on reserves.
Uses of Debt Financing 691 100
11. Mozambique’s new medium-term Economic Development 312 45
Infrastructure 379 55
debt strategy aims to increase the share of Sources: Mozambican authorities and IMF staff estimates.
external debt (limiting new loans to 1/ Contracting and guaranteeing of new debt. The present value of
debt is calculated using the terms of individual loans and applying the
concessional debt), and lengthen maturities 5 percent program discount rate.
2/ Debt with a grant element that exceeds a minimum threshold. This
on domestic debt, while looking for domestic minimum is typically 35 percent, but could be established at a higher
level.
3/ Debt with a positive grant element which does not meet the
minimum grant element.
4/ Debt without a positive grant element. For commercial debt, the
present value would be defined as the nominal/face value.
7
See External Sector Assessment Annex in Staff Report.

private sector creditors. 8 The authorities contracted a new $200 million concessional loan with the
World Bank in 2022 and reached a new loan agreement of $300 million to finance their economic
development plan, to be signed by mid-2023. They have been carefully considering investment
priorities and listed a pipeline of projects that would be signed in 2023. The total amount envisaged
in this pipeline will stay within the agreed ceiling (Text Table 4). 9 Over the medium term, external
financing is projected to increase slightly, reflecting an increase in multilateral concessional
financing and in bilateral creditors’ lending, with the share of multilateral lending still dominant but
decreasing gradually. Over the long term, Mozambique is projected to rely gradually less on external
financing as LNG revenues start flowing in.
12. External financing gaps are

Text Table 5. Mozambique: Selected
estimated at 1.5 percent of GDP on Macroeconomic Assumptions
average over the period 2023-24. The 2022 2023 2024 2025
Primary Balance (Percent of GDP) 2/
2026 Long-term 1/
financing needs arise because of budget Current DSA

ECF 2022 DSA
-2.1
0.5
0.5
-0.5
1.0
0.5
1.8
1.4
2.0
4.1
5.5
4.2
outlays. Compared to the May 2022 DSA, Inflation rate (GDP Deflator, In Percent)
Current DSA 11.5 8.1 7.4 7.0 6.2 5.5
spending pressures—mostly wage bill- ECF 2022 DSA 7.2 7.0 6.7 6.3 5.9 5.5
related—have worsened the primary balance

Nominal GPD (Meticals million)
Current DSA 1,223,162.0 1,414,448.4 1,594,268.2 1,790,440.9 1,977,284.6 5,587,891.0
ECF 2022 DSA 1,173,199.9 1,317,565.9 1,522,671.1 1,700,752.6 2,049,826.3 5,400,182.1
(Text Table 5). The authorities have used SDR
162.9 million of the SDR allocation of SDR
Real GDP Growth (Percent)
Current DSA 4.2 7.0 5.0 5.0 4.0 5
227.2 million as a complement to the IMF-

ECF 2022 DSA 3.8 5 8.3 5.1 13.8 4.4
Exports of Goods and Services (Growth)
supported program in 2022 and an

Current DSA 46.9 -1.4 3.8 5.3 3.8 7.3
ECF 2022 DSA 19.3 5 14.3 4.9 24.1 6.6
additional SDR 65 million has been used in Current Account Balance (Percent of GDP)
Current DSA -32.9 -15.5 -38.9 -43.2 -44.9 -8.5
2023. The three-year arrangement under the ECF 2022 DSA

1/ Average 2028-40
-44.9 -39.0 -37.6 -37.0 -25.4 0.5
Extended Credit Facility of 150 percent quota 2/ The primary balance presented here is composed of the central government primary deficit augmented
by LNG revenues accruing directly to repay ENH debt.
(SDR 340.8 million) supports the authorities’

reform program, addresses near-term BOP needs and provides budget support in the pandemic
recovery phase.
13. A cumulative improvement of the primary balance (after grants) of about 3 percent of
GDP is projected by 2024 compared with 2022. This is mainly driven by reforms on VAT and the
wage bill:
• Revenue performance and projections over the medium-term. VAT collections in 2022
underperformed because of lower-than-expected activity associated with LNG projects. The
VAT rate was reduced from 17 to 16 percent in 2023 and was combined with a broadening
of the VAT net that was smaller than previously expected, as the elimination of some
exemptions was delayed to 2024. Going forward, the expected resumption of LNG projects
and positive spillovers from stronger economic activity in the North will help strengthen tax
8
Under the IMF ECF and the World Bank’s Sustainable Development Finance Policy, Mozambique has committed to
zero non-concessional external borrowing.
9
The projected weighted average grant element shown in Table 1 includes the sovereign guarantee commitments
associated with the development phase of the LNG Golfinho project.

revenue. Moreover, the authorities have committed to revenue mobilization by including all
public sector employees under the personal income tax net.
• Expenditure projections and wage bill reducing corrective measures. In 2023, the wage
bill is projected at 14.6 percent of GDP compared to 16.4 percent of GDP in 2022. After the
wage bill overruns of 2022, in January, the authorities reduced public sector salaries by 20
percent and eliminated the 13th-month wage. In May, the Parliament amended the wage bill
law to reduce the salary and subsidies for statutory appointed and elected public office
holders by 5 and 10 percentage points, respectively (prior action). In addition, the authorities
will incorporate all public sector servants into the electronic payroll system (prior action).
Further reduction of the wage bill will be achieved through an audit and "proof of life" of all
public sector servants (proposed structural benchmark for September 2023). Spending in
goods and services is projected at 2.9 percent of GDP, in line with the ceiling in the
approved 2023 budget, and 1 percent of GDP lower than in 2022.
• The authorities are committed to further rationalize the wage bill over the medium
term. The aim is to create fiscal space for important spending priorities including investment
in resilient infrastructure and human capital. They will prepare an action plan laying out how
the wage bill will be reduced to 10 percent of GDP over the medium term. The details of the
action plan will be informed by forthcoming technical assistance from FAD. The authorities
will start reporting the wage bill monthly to improve monitoring under the program.
14. The BM has proactively tightened monetary policy to help contain FX demand and
inflation expectations in a context of loose fiscal policy. The outlook for global commodity
prices is uncertain and there are risks that higher wages could fuel demand for imports, and
contribute to depreciation pressures on the exchange rate, which would spill over to inflation. In this
context, the current tight monetary policy conditions are warranted. Once the fiscal position is
consolidated, there would be scope to loosen monetary policy and normalize the balance between
monetary and fiscal policies. In the meantime, high interest rates and crowding out from public
spending constitute a hurdle to private sector-led development.
15. The authorities have committed to implementing reforms to address structural

weaknesses. These include those supported under the World Bank DPF which aims to (i) strengthen
budget institutions and responsibility; (ii) improve the investment climate and financial access; and
(iii) promote low-carbon growth potential. The authorities have also committed to reforms under
the IMF ECF arrangement, which helps reduce protracted BOP vulnerabilities through supporting
structural reforms aimed at: (i) developing the policy and institutional framework for managing LNG
resources; (ii) improving governance and transparency to help foster private development; (iii)
increasing the efficiency of public resources management; and (iv) enabling diversification and
equitable growth through public investment in human capital and climate-resilient infrastructure.
16. Risks to the outlook are tilted to the downside. Previously identified risks, notably
extreme climate events and a deterioration in the security situation in the North, are still pertinent.
Despite recent military success, a deterioration of the security situation in the North cannot be ruled
out, which would have significant humanitarian costs and could lead to further delays or

abandonment of the LNG megaprojects led by Totalenergies and ExxonMobil. Geo-economic

fragmentation and its consequences could impact growth. In addition, there are potential
contingent liability risks related to SOEs and disputed government guarantees on commercial loans
(Proindicus and MAM).
17. The debt sustainability framework’s realism tools reflect the baseline assumptions
(Figures 3 and 4). Projected variations in debt indicators are very similar to those observed over the
past five year for external debt, but total public debt is unexpectedly higher. Growth projections in
2023 are much higher than those suggested by the alternative fiscal-growth multiplier analysis due
to the expected effects of LNG. The adjustment in the primary balance in the baseline scenario is
high compared with adjustments carried out in a sample of comparable LICs that requested Fund
support since 1990. This is due to the immediate policy adjustment and corrective measures to
address wage bill overruns. Compared to the previous DSA, changes in private investment are driven
almost exclusively by changes to LNG-related imports, and the further postponement of the Area 1
project.
Box 1. LNG-Related Debt Structure

ENH is a partner in the LNG projects led by Totalenergies (Area 1, Golfinho) and ENI (Area 4, Coral),
holding shares of 15 and 10 percent, respectively. At end-December 2022, ENH’s debt amounted to 18.8
percent of GDP, about 18 percent of total PPG debt. A third project led by ExxonMobil (Area 4, Rovuma) has been
considered but has not reached Final Investment Decision yet. This means that debt contracted for exploration of
Area 4 will initially be repaid through revenues from the Coral offshore platform.
IMF staff’s current understanding is that the debt and the contracts governing the State’s obligations have the
following features:
• ENH's shares are funded (or "carried") by the partner energy companies as project finance borrowing. The
debt linked to the exploration phase is subject to interest, compounded annually, at 3 percent per annum
until full repayment for the Coral and Golfinho projects. The debt linked to the development phase of Coral is
subject to interest, compounded annually, at 8.7 percent per annum until fully repaid. For Golfinho, the
interest rate is 9 percent from the date incurred until one year after the completion of the development
phase. Thereafter, the interest rate is 13 percent until the amounts are repaid in full.
• The contracts are structured such that ENH debt repayments will be taken directly from LNG revenues once
they start. For Golfinho, 80 percent of ENH revenues (after deduction of operating costs) serves to pay the
debt related to the exploration and development of the project, while for Coral this share is 90 percent. In
both cases, 100 percent of revenues will be used to repay any remaining debt after 15 years, or when debt
level reaches a pre-determined trigger point. These two projects have pre-sold a significant majority of the
expected gas production in contracts with Asian customers and international energy companies.
• A US$2.25 billion (15 percent of GDP) sovereign guarantee covers ENH's debt-financed share in the LNG
megaprojects' financing package for Golfinho and lapses within about a year after the start of LNG
production, currently expected in 2027. The full amount is gradually included in PPG debt, as project financing
is disbursed. No other public guarantees are extant.
The funding for the projects is issued through Special Investment Vehicles (SIVs) incorporated in United Arab
Emirates and in Mozambique.

C. Public Debt Related to LNG
18. The DSA includes the value of the sovereign guarantee as well as the equity tranche of
disbursed ENH debt. The value of the guarantee is assumed to increase gradually to reach its
maximum value by the end of the development phase of the Golfinho project. Based on staff’s
understanding of the structure of the projects and the State guarantee, should the Area 1 projects
be abandoned as they stand now, ENH would be liable only for its share of the debt funded tranche
of capital expenditures disbursed so far—15 percent of the total development phase investment to
date, amounting to US$43 million (0.2 percent of GDP). The State guarantee would be triggered for
this amount if ENH is not able to repay. If the project resumes, the value covered by the guarantee
would rise in tandem with actual disbursements, up to the US$2.25 billion ceiling, until full
cancellation upon commencement of LNG production (See Box 1 for further details on the structure
of the LNG debt contracts).
COUNTRY CLASSIFICATION
19. As in the last DSA, Text Table 6. Mozambique: Composite Indicator Score
debt carrying capacity is
Debt Carrying Capacity and Thresholds
assessed as weak.
Countries’ debt carrying Country Mozambique
capacity is measured Debt Carrying Capacity Weak
through a composite index, Final Classification based on Classification based on the Classification based on the
equal to 2.62 for current vintage previous vintage two previous vintage
Mozambique (Text Table Weak Weak

2.62
Weak
2.61
Weak
2.72
6), 10 similar to the previous
DSA. The analysis that Calculation of the CI Index
underpins the indicator Components Coefficients (A) 10-year average

values (B)
CI Score components
(A*B) = (C)
Contribution of
components
considers the imports CPIA

Real growth rate (in percent)
0.385
2.719
3.133
4.654
1.21
0.13
46%
5%
related to the large scale of

Import coverage of reserves (in
percent) 4.052 30.874 1.25 48%
LNG megaprojects under

Import coverage of reserves^2 (in
percent) -3.990 9.532 -0.38 -15%
Remittances (in percent) 2.022 1.120 0.02 1%
development (amounting World economic growth (in
percent) 13.520 2.898 0.39 15%
to 300 percent of GDP). If CI Score 2.62 100%
only non-megaproject CI rating Weak
imports were considered in

Applicable Thresholds
the calculation of the
composite index, the debt
EXTERNAL debt burden thresholds TOTAL public debt benchmark
PV of debt in % of PV of total public debt in percent of GDP 35
Exports 140
carrying capacity would be GDP
Debt service in % of
30
assessed as medium, and Exports

Revenue
10
14
relevant debt distress Source: IMF staff calculations.

thresholds revised upward.
10
Debt carrying capacity is assessed to be weak with an index strictly below 2.69 for two years in a row, medium with
an index between 2.69 and 3.05, and strong with an index strictly above 3.05.

Megaproject imports are fully financed through special investment vehicles outside the country with
no potential bearing on international reserves (though they are included in the BoP statistics).
DEBT SUSTAINABILITY
A. External Debt Sustainability Analysis
20. Three external debt sustainability indicators are above sustainability thresholds in
a significant number of years (Table 1 and Figure 1). Although the assessment is mostly
unchanged from the last DSA, the ratios of debt service to revenue and to exports have somewhat
improved, as revenue projections are higher due to revised assumptions on VAT base broadening.
All indicators except the PV of debt service to revenue fall significantly below the sustainability
threshold at the latest by 2029. The PV of the debt to GDP ratio reaches the sustainability thresholds
in the same year as in the May 2022 DSA. The relatively large residual is partially due to projected
price evolutions and ENH debt accumulation. The debt solvency indicators reach a peak in 2028,
when ENH debt starts to be repaid—directly from LNG revenue—and the Eurobond is assumed to
be repaid as well, within 4 years.
• The PV of external public debt in terms of GDP is projected to be around 42 percent at end-
2023 and to remain above the sustainability threshold until 2027. This is partially driven by
ENH borrowing to finance its participation in the LNG megaprojects, and the issuance of
a sovereign guarantee covering ENH’s participation in Golfinho.
• The PV of external public debt in terms of exports is below the 140 percent threshold in
2023 and improves rapidly after 2026 as LNG exports pick up. A large increase in exports,
which started in 2021 with commodity price increases and rising demand for intermediate
goods, is confirmed since the last DSA, where the indicator was already below the threshold,
but at a slightly higher value.
• External public debt service in terms of exports is below the threshold from 2023 to 2026,
and again in 2029, subsequently remaining below the threshold. This path is equivalent to
the previous DSA, although the peak in 2028 is higher.
• External public debt service in terms of revenue breaches the threshold in 2027–2029. This is
three years less in which the threshold is breached compared to the previous DSA.
21. External public debt ratios are most sensitive to changes in the primary balance,
export shocks, and other flows (Figure 1, Table 3). All shocks lead to threshold breaches for all
debt indicators, except for the PV of debt to exports where the breaches are only due to the primary
balance, export, other flows and combined shocks. The stress tests illustrate that a nominal export
growth (in U.S. dollars) one standard deviation below baseline in 2024 and 2025 would increase the
PV of external public debt-to-GDP by 28 percentage points (to 70 percent) in 2025 compared to

2023. 11 Similarly, the PV of external public debt-to-exports would be pushed above the sustainability
threshold to 276 percent in 2025 (compared to staying at 108 percent under the baseline). The
export shock pushes the debt service to export ratio significantly above the sustainability threshold
from 2024 to 2033. Similarly, a combined shock to current transfers-to-GDP and FDI-to-GDP ratios
keeps the PV of debt to GDP above the threshold until 2030 and raises the PV of debt to exports
above the threshold in 2025 and 2026. As in the previous DSA, a 30 percent nominal depreciation in
2023 would lead to an increase in the debt service-to-revenue ratio by an average of 3 percentage
points over the projection period compared to the baseline. 12
22. The realization of contingent liabilities or a natural disaster would significantly worsen
the outlook. In this case, the PV of debt to GDP would be higher, and its return below sustainability
threshold postponed by two years. The realization of the contingent liabilities would bring the PV of
external public debt in terms of exports above the baseline by an average of 24 percentage points
over the remainder of the projection period, and above the threshold in 2026. It would bring the
external public debt service in terms of exports above the sustainability threshold in 2027-2028,
while the external public debt service in terms of revenue would be over the sustainability threshold
between 2027-2031. Similarly, a large disaster shock with an impact of 10 percent of GDP would
significantly worsen debt sustainability, pushing back the return of the PV of external debt to GDP
by one year. A commodity price shock would not have a significant impact.
B. Public Sector Debt Sustainability Analysis
23. Under the baseline, the indicator of public debt sustainability reaches the
sustainability threshold by 2030. Total PPG debt is estimated at 95.5 percent of GDP at end-2022,
with external debt accounting for about 74 percent of total public debt (71.1 percent of GDP), a
decrease compared to 2021, mostly due to higher GDP and exchange rate dynamics. 13 Due to the
large financing needs associated with the recovery from the pandemic as well as the unexpected
costs associated with the wage bill reform in 2022, the PV of debt-to-GDP is projected to reach
below the 35 percent of GDP benchmark only in 2030, one year later than in the previous DSA
(Table 2 and Figure 2).
24. Public debt sustainability indicators are highly sensitive to other flows, the primary
balance, and exports (Table 4). A shock to the primary balance, which would also correspond to the
baseline projection minus one standard deviation in 2024 and 2025, would lead the PV of debt-to-
GDP to reach 86 percent by 2025 (compared to 66 percent under the baseline). Similarly, a shock to
current transfers-to-GDP and FDI-to-GDP ratios during the same years would lead the PV of debt-
to-GDP to reach 81 percent in 2025, while a shock to exports would bring the ratio to 86 percent in
11
This stress test does not reflect a plausible scenario as it implies that there would be no export revenue from LNG,
despite still including all the debt created by the projects. However, should the project not go ahead for reasons
outside of the control of the country, Mozambique would not be liable for the latter according to the LNG contracts.
12
Vulnerability to exchange rate movements is an expected outcome for a commodity exporter like Mozambique.
13
In the medium term, the residual is mostly due to ENH debt accumulation.

2025. Under realization of contingent liabilities or a commodity price shock, the PV of debt-to-GDP
would cross the threshold one year later than in the baseline (2031).
RISK RATING AND VULNERABILITIES

25. Mozambique’s debt is assessed to be at high risk of distress, yet sustainable in
a forward-looking sense taking into account prospective LNG revenue and risk management
of related debt. This assessment is unchanged from the DSA at program approval. The rating of
“high risk of debt distress” is due to several indicators remaining above sustainability thresholds for
several years, and to the high vulnerability of debt to downside risks, including: (i) possible
realization of contingent liabilities, (ii) unfavorable developments in the trade balance or exchange
rate shocks, and (iii) difficulty in sustaining fiscal discipline especially in a context of climate shocks
and upcoming elections. The path of the sustainability indicators is downward sloping and reaches
the sustainability thresholds over the projection period. In addition, the following mitigating factors
underpin the assessment:
• Future borrowing and government guarantees largely reflect state participation in LNG
developments. The State’s guarantee is gradually included in PPG debt (up to 15 percent of
GDP) over the period, since it is only activated in tandem with project finance
disbursements—the current exposure amounts to 0.2 percent GDP and will rise only as
projects resume.
• Debt carrying capacity is likely to be stronger than signaled by the CI rating because
international reserves do not need to cover imports related to megaprojects (which are fully
funded through SIVs outside the country). The breaches of two external debt sustainability
thresholds are, hence, judged to be narrower and less persistent than suggested by the
standard methodology. Having a debt carrying capacity assessed as medium would imply
that both the PV of external debt to GDP and the PV of public debt to GDP would reach the
sustainability threshold by 2027 and 2028, respectively. The other three indicators for
external debt sustainability would be below sustainability thresholds for most of the
projection period (except for one year—2028—for the debt service-to-revenue ratio).
• The assessment is based on a relatively conservative baseline for growth, which does not
include positive spillovers from LNG to the wider economy.
• Finally, besides the debt linked to LNG projects, external debt is mostly composed of
concessional multilateral and bilateral debt, and a Eurobond, product of restructuring a debt
linked to the “undisclosed debts”.
26. The financial structure of the State’s involvement in the LNG projects offers
substantial protection against the risk that onshore LNG projects do not resume. Compared
with the situation at the time of program approval, the risk that the Golfinho project does not
resume is still considered unlikely and is not in the baseline, although further delays or full
cancellation could still occur, as the security situation has not been fully resolved. Moreover, the
second onshore project (Rovuma) is still being evaluated. The State is protected in case the Area 1

project is cancelled for reason beyond its control. However, the debt service burden for Area 4
would be carried solely from the production of the offshore platform leaving ENH with negative
cash flow balance. Without onshore LNG, lower growth would leave the country carrying an already
heavy debt burden for longer, and future external and exchange rate risks could be expected to be
higher. Mozambique could seek other ways of exploiting its large natural resources, but the window
of opportunity during the energy transition may be short.
27. Progress has been made in debt management and oversight. The debt unit in the
Ministry of Economy and Finance has taken important steps, including (i) adopting a medium-term
debt strategy (published in July 2022), which is being implemented with the help of TA; (ii) working
to move to a new IT system (Meridian), which will encompass domestic and external debt of the
central government, and eventually SOE debt; (iii) reforming cash and debt management to exert
greater control of domestic debt issuance. At the same time, the authorities have continued to
regularly publish annual and quarterly public debt reports; and supported public accountability and
enforcement measures stemming from the “undisclosed debts” scandal, including prosecution of
senior officials and public figures.
28. In addition, the authorities have committed to several measures under IDA’s
Sustainable Development Financing Policy (SDFP). As an IDA country currently in high risk of
debt distress, Mozambique is subject to IDA’s SDFP, which replaced the Non-Concessional
Borrowing Policy (NCBP). The SDFP foresees a series of Policy and Performance Actions (PPAs) that
contribute to addressing critical debt vulnerabilities. Under the policy, the authorities have
committed this fiscal year to (i) not enter into any contractual obligations for new external public
and publicly guaranteed (PPG) non-concessional debt; (ii) publish a comprehensive report using
accurate external PPG and private nonguaranteed debt, addressing the severe inconsistencies
between stocks and flows identified in the 2021 Debtor Reporting System (DRS) Report, and publish
an error-free debt report for 2022 debt report capturing SOE and PPP-related debt.
AUTHORITIES’ VIEW
29. The authorities partially agreed with the assessment made in the DSA. The authorities
acknowledged the debt sustainability assessment and its focus on external debt indicators. They also
suggested that debt related to the LNG project should not be included in the analysis as it is part of
SPVs and will be automatically repaid through LNG revenues. With respect to domestic debt, they
noted their rising concern about its high cost. They pointed out that repayment “bunching” for both
external and domestic debt service in February/March and September 2023 have created liquidity
constraints. They acknowledged that they had incurred arrears in servicing debt, some of which led
to arrears under the program. They cited administrative issues, linked to a debt-reconciliation
exercise, as well as liquidity constraints as reasons for these arrears. To avoid such arrears in the
future, the authorities have been clearing the debt database to avoid discrepancies between the
internally forecast debt service and the invoices sent by the creditors. They are preparing the
migration to the new debt database, which will encompass external and domestic debt by
December 2023, and eventually on-lending to SOEs. The government is studying urgent measures
aimed at building contingent provisions for the Treasury, including the concentration/consolidation

of public sector deposits with the purpose of building a liquidity/cash pool which would provide
prompt and efficient access to relatively cheaper resources by tapping the idle deposits of public
institutions to finance temporary/seasonal deficits. In addition, the government is looking to restrain
issuances of short-to medium-term bonds to avoid incurring new liabilities within this already critical
redemption horizon, whilst considering broader medium to longer-term reforms to lower
government’s overall borrowing costs. Returning to a level of debt that is more sustainable is a goal
of the authorities and of the IMF-supported program. The government published a medium-term
debt strategy in 2022 and is currently revising it. The government is committed to enhancing the
sustainability and transparency of public sector debt, and publishes quarterly and annual debt
reports, covering stocks, on-lending, and state guarantees, including for most SOEs. The IMF and
Ministry of Finance teams worked together to confirm the 2022 external and domestic debt stocks.
All discrepancies have been resolved.

16
Table 1. Mozambique: External Debt Sustainability Framework, Baseline Scenario, 2020–2043

MOZAMBIQUE
(In percent of GDP; unless otherwise indicated)
Actual Projections Average 8/
2020 2021 2022 2023 2024 2025 2026 2027 2028 2033 2043 Historical Projections
External debt (nominal) 1/ 185.9 154.8 154.8 162.0 189.4 217.3 248.6 248.8 239.4 238.5 284.9 140.2 222.8 Definition of external/domestic debt Currency-based
of which: public and publicly guaranteed (PPG) 97.8 81.2 71.1 65.6 69.0 68.3 66.8 57.9 47.4 19.4 5.4 78.2 45.5
Is there a material difference between the
No
two criteria?
Change in external debt 31.5 -31.1 0.0 7.2 27.4 27.9 31.4 0.2 -9.4 7.7 3.3
Identified net debt-creating flows 19.6 -31.6 -2.3 1.8 17.9 18.8 20.5 -5.5 -15.7 -7.8 -15.5 4.5 -3.4
Non-interest current account deficit 25.8 21.1 31.2 11.1 32.0 35.9 37.5 23.0 9.2 -5.3 -0.5 28.5 10.8
Deficit in balance of goods and services 30.3 24.8 33.9 13.1 34.3 38.0 38.5 22.3 8.1 -5.7 -6.0 33.5 11.3
Exports 30.9 39.8 49.1 42.3 40.3 39.6 38.9 43.0 45.2 45.6 43.7
Debt Accumulation
Imports 61.2 64.6 83.1 55.4 74.6 77.6 77.4 65.3 53.3 39.9 37.7
8.0 60
Net current transfers (negative = inflow) -4.8 -4.5 -5.9 -5.3 -4.4 -4.1 -4.1 -3.4 -3.2 -2.5 -1.9 -5.6 -3.5
of which: official -1.6 -1.2 -2.0 -1.9 -1.1 -0.9 -1.0 -0.6 -0.7 -0.4 0.0
Other current account flows (negative = net inflow) 0.2 0.8 3.1 3.4 2.1 2.0 3.2 4.2 4.4 2.9 7.4 0.6 2.9 6.0 50
Net FDI (negative = inflow) -21.4 -31.7 -10.3 -4.3 -13.7 -15.6 -16.3 -7.9 -9.3 -7.7 -16.8 -22.9 -9.5
Endogenous debt dynamics 2/ 15.2 -21.0 -23.1 -5.0 -0.5 -1.5 -0.8 -20.6 -15.6 5.1 1.8 4.0 40
Contribution from nominal interest rate 1.8 1.3 1.7 4.4 6.9 7.3 7.4 7.7 10.8 11.4 9.1
Contribution from real GDP growth 2.0 -3.9 -5.4 -9.4 -7.4 -8.8 -8.1 -28.3 -26.3 -6.3 -7.3
2.0 30
Contribution from price and exchange rate changes 11.4 -18.4 -19.4 … … … … … … … …
Residual 3/ 12.0 0.5 2.2 5.4 9.6 9.0 10.9 5.7 6.3 15.5 18.8 4.3 11.0
of which: exceptional financing -0.6 -0.5 -0.4 -0.4 -0.2 -0.2 -0.1 -0.1 -0.1 0.0 0.0 0.0 20
Sustainability indicators -2.0 10

PV of PPG external debt-to-GDP ratio ... ... 47.3 42.4 42.6 42.7 42.8 37.4 29.8 13.5 3.0
PV of PPG external debt-to-exports ratio ... ... 96.3 100.3 105.7 107.9 109.9 87.0 66.0 29.7 7.0
-4.0 0
PPG debt service-to-exports ratio 11.9 6.9 6.1 7.4 7.6 7.6 7.6 10.0 13.5 5.1 1.9 2023 2025 2027 2029 2031 2033
PPG debt service-to-revenue ratio 15.3 10.9 12.8 13.3 12.3 11.8 11.5 16.0 22.9 9.0 2.5
Gross external financing need (Million of U.S. dollars) 1519.0 -896.7 4981.4 3353.8 7049.9 8366.5 9361.1 9296.9 7171.3 3133.1 223.2 Debt Accumulation
Grant-equivalent financing (% of GDP)
Key macroeconomic assumptions
Grant element of new borrowing (% right scale)
Real GDP growth (in percent) -1.2 2.4 4.2 7.0 5.0 5.0 4.0 13.1 12.1 2.9 2.7 4.0 7.1
GDP deflator in US dollar terms (change in percent) -6.9 11.0 14.3 7.0 3.9 2.0 1.6 1.7 1.9 2.0 2.0 -1.4 2.6
Effective interest rate (percent) 4/ 1.1 0.8 1.3 3.3 4.6 4.1 3.6 3.6 4.9 5.2 3.4 1.2 4.8 External debt (nominal) 1/
Growth of exports of G&S (US dollar terms, in percent) -22.0 46.6 46.9 -1.4 3.8 5.3 3.8 27.1 20.0 3.1 4.9 9.9 9.3 of which: Private
Growth of imports of G&S (US dollar terms, in percent) -9.0 20.0 53.1 -23.7 46.9 11.4 5.3 -3.0 -6.8 7.5 4.6 4.7 3.9 300
Grant element of new public sector borrowing (in percent) ... ... ... 50.8 52.9 31.4 22.0 24.1 31.2 48.2 40.7 ... 39.8
Government revenues (excluding grants, in percent of GDP) 23.9 25.3 23.4 23.6 24.8 25.4 25.9 26.9 26.6 25.7 32.6 24.7 25.3 250
Aid flows (in Million of US dollars) 5/ 1165.9 661.3 1080.9 1647.0 1960.7 1048.9 882.0 793.6 844.9 733.5 71.2
Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 6.8 7.0 3.5 2.7 2.1 2.0 1.2 0.1 ... 3.0
200
Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 70.3 60.2 46.5 44.8 51.4 65.8 84.0 40.7 ... 68.0
Nominal GDP (Million of US dollars) 14,157 16,087 19,157 21,926 23,900 25,598 27,030 31,095 35,514 53,376 87,131
Nominal dollar GDP growth -8.0 13.6 19.1 14.5 9.0 7.1 5.6 15.0 14.2 4.9 4.8 2.4 9.8 150
Memorandum items: 100

PV of external debt 7/ ... ... 131.0 138.8 163.0 191.7 224.6 228.3 221.9 232.7 282.6
In percent of exports ... ... 266.7 328.2 404.7 484.1 577.0 530.9 490.9 509.9 647.0 50
Total external debt service-to-exports ratio 20.7 12.6 10.5 19.9 27.7 31.2 34.3 34.4 44.9 41.2 40.1
PV of PPG external debt (in Million of US dollars) 9060.6 9306.0 10176.7 10938.2 11567.0 11632.7 10590.8 7223.5 2647.7 0
(PVt-PVt-1)/GDPt-1 (in percent) 1.3 4.0 3.2 2.5 0.2 -3.4 -1.0 -0.5 2023 2025 2027 2029 2031 2033
Non-interest current account deficit that stabilizes debt ratio -5.8 52.2 31.2 3.9 4.6 8.0 6.2 22.8 18.6 -12.9 -3.8
Sources: Country authorities; and staff estimates and projections.

1/ Includes both public and private sector external debt.
2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.
3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.
4/ Current-year interest payments divided by previous period debt stock.
5/ Defined as grants, concessional loans, and debt relief.
6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).
7/ Assumes that PV of private sector debt is equivalent to its face value.
8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.

Table 2. Mozambique: Public Sector Sustainability Framework, Baseline Scenario, 2020–2043
(In percent of GDP; unless otherwise indicated)
Actual Projections Average 7/
2020 2021 2022 2023 2024 2025 2026 2027 2028 2033 2043 Historical Projections
Public sector debt 1/ 120.0 104.9 95.5 89.7 92.8 90.6 87.9 75.0 61.3 18.8 -9.9 95.8 59.0
Definition of external/domestic Currency-
of which: external debt 97.8 81.2 71.1 65.6 69.0 68.3 66.8 57.9 47.4 19.4 5.4 78.2 45.5
debt based
of which: local-currency denominated
Change in public sector debt 20.9 -15.1 -9.3 -5.8 3.0 -2.1 -2.7 -12.9 -13.7 -5.0 -2.2 Is there a material difference
No
Identified debt-creating flows 20.0 -17.1 -8.0 -8.4 -7.7 -7.2 -5.6 -13.7 -13.2 -5.4 -7.8 -5.3 -8.3 between the two criteria?
Primary deficit 2/ 2.3 0.9 2.1 -0.5 -1.0 -1.8 -2.0 -4.7 -6.1 -5.0 -7.1 -5.1 -3.8
Revenue and grants 27.5 27.4 27.3 27.5 26.6 27.1 27.7 28.4 28.2 26.7 32.6 27.5 27.1
of which: grants 3.6 2.1 3.9 3.8 1.8 1.6 1.8 1.5 1.6 1.0 0.0 Public sector debt 1/
Primary (noninterest) expenditure 29.8 28.3 29.4 27.0 25.6 25.2 25.7 23.7 22.1 21.7 25.5 22.4 23.3
Automatic debt dynamics 17.7 -18.0 -10.2 -7.9 -6.7 -5.3 -3.6 -9.0 -7.2 -0.4 -0.7 of which: local-currency denominated
Contribution from interest rate/growth differential 1.3 -1.8 -3.1 -7.9 -6.7 -5.3 -3.6 -9.0 -7.2 -0.4 -0.7
of which: foreign-currency denominated
of which: contribution from average real interest rate 0.1 1.0 1.1 -1.7 -2.5 -1.0 -0.1 1.2 0.9 0.3 -0.9
of which: contribution from real GDP growth 1.2 -2.8 -4.2 -6.2 -4.2 -4.4 -3.5 -10.2 -8.1 -0.7 0.2 100
Contribution from real exchange rate depreciation 16.4 -16.2 -7.1 ... ... ... ... ... ... ... ...
80
Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
60
Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40
Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20
Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
0
Residual 0.9 2.0 -1.3 2.6 10.7 5.1 2.8 0.8 -0.5 0.4 5.6 11.1 1.3
-20 2023 2025 2027 2029 2031 2033
Sustainability indicators
PV of public debt-to-GDP ratio 3/ ... ... 71.8 67.0 67.4 66.1 64.8 55.2 44.3 13.1 -12.1
PV of public debt-to-revenue and grants ratio … … 263.0 244.1 253.5 244.0 234.1 194.4 157.1 49.1 -37.2
Debt service-to-revenue and grants ratio 4/ 39.5 42.2 43.6 25.0 34.3 35.4 38.4 35.0 36.3 9.1 -15.0
Gross financing need 5/ 13.1 12.5 14.0 6.4 8.2 7.8 8.6 5.3 4.2 -2.6 -12.0 of which: held by residents
Key macroeconomic and fiscal assumptions of which: held by non-residents

Real GDP growth (in percent) -1.2 2.4 4.2 7.0 5.0 5.0 4.0 13.1 12.1 2.9 2.7 4.0 7.1 1
1
Average nominal interest rate on external debt (in percent) 1.3 1.1 1.4 1.3 1.7 1.5 1.4 2.9 2.7 3.7 2.4 1.6 2.7
1
Average real interest rate on domestic debt (in percent) 4.8 7.5 4.7 1.5 2.7 2.3 1.7 3.2 3.2 -6.3 6.9 4.7 1.5 1
Real exchange rate depreciation (in percent, + indicates depreciation) 20.7 -17.1 -9.1 … ... ... ... ... ... ... ... 5.2 ... 1
Inflation rate (GDP deflator, in percent) 3.4 4.6 11.5 8.1 7.4 7.0 6.2 5.7 5.5 5.5 5.5 6.1 6.1 1 n.a.
Growth of real primary spending (deflated by GDP deflator, in percent) 18.2 -2.8 8.5 -1.9 -0.3 3.5 5.8 4.4 4.5 4.7 3.3 2.4 4.2 0
Primary deficit that stabilizes the debt-to-GDP ratio 6/ -18.7 16.0 11.5 5.3 -4.0 0.3 0.7 8.2 7.6 0.0 -4.9 2.9 3.2 0
PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0
0
0
Sources: Country authorities; and staff estimates and projections. 2023 2025 2027 2029 2031 2033
1/ Coverage of debt: The central government, central bank, government-guaranteed debt, non-guaranteed SOE debt . Definition of external debt is Currency-based.
2/ The primary deficit presented here is composed of the central government primary deficit augmented by LNG revenues accruing directly to repay ENH debt.
3/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections.
4/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.
5/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.
6/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question.
7/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
17

Figure 1. Mozambique: Indicators of Public and Publicly Guaranteed External Debt Under
Alternatives Scenarios, 2023–2033
PV of debt-to GDP ratio PV of debt-to-exports ratio

80 300
70
250
60
50 200
40
150
30
20 100
10 50
0
0
-10 Most extreme shock: Exports Most extreme shock: Exports
-20 -50
2023 2025 2027 2029 2031 2033 2023 2025 2027 2029 2031 2033
Debt service-to-exports ratio Debt service-to-revenue ratio

30 30
25 25
20 20
15 15
10 10
5 5
Most extreme shock: Exports Most extreme shock: Exports
0 0
2023 2025 2027 2029 2031 2033 2023 2025 2027 2029 2031 2033
Baseline Historical scenario Most extreme shock 1/ Threshold
Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests*
Size Interactions Default User defined
Shares of marginal debt

No No External PPG MLT debt 100%
Tailored Stress Terms of marginal debt
Combined CL Yes Avg. nominal interest rate on new borrowing in USD 2.3% 2.3%
Natural disaster No No USD Discount rate 5.0% 5.0%
Commodity price No No Avg. maturity (incl. grace period) 30 24
Market financing n.a. n.a. Avg. grace period 9 6
Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are
the default settings for the stress tests. "n.a." indicates that the assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal
stress test does not apply. debt are based on baseline 10-year projections.

1/ The most extreme stress test is the test that yields the highest ratio in or before 2033. The stress test with a one-off breach is also presented (if any), while the one-off
breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach,
only that stress test (with a one-off breach) would be presented.

Figure 2. Mozambique: Indicators of Public Debt Under Alternative Scenarios, 2022–2032

PV of Debt-to-GDP Ratio
100
90
80
70
60
50
40
30
Most extreme shock: Exports
20
10
0
2023 2025 2027 2029 2031 2033
PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio

350 50
45
300
40
250 35
30
200
25
150
20
100 15
10
50 Most extreme shock: Exports Most extreme shock: Growth
5
0 0
2023 2025 2027 2029 2031 2033 2023 2025 2027 2029 2031 2033
Baseline Most extreme shock 1/

TOTAL public debt benchmark Historical scenario
Borrowing assumptions on additional financing needs resulting from the stress Default User defined
tests*
Shares of marginal debt
External PPG medium and long-term 54% 90%
Domestic medium and long-term 32% 8%
Domestic short-term 14% 2%
Terms of marginal debt
External MLT debt
Avg. nominal interest rate on new borrowing in USD 2.3% 2.3%
Avg. maturity (incl. grace period) 30 24
Avg. grace period 9 6
Domestic MLT debt
Avg. real interest rate on new borrowing 6.4% 12.0%
Avg. maturity (incl. grace period) 3 3
Avg. grace period 2 2
Domestic short-term debt
Avg. real interest rate 5.5% 12.5%
* Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under
the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections.

1/ The most extreme stress test is the test that yields the highest ratio in or before 2033. The stress test with a one-off breach is
also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off
breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off
breach) would be presented.

Table 3. Mozambique: Sensitivity Analysis for Key Indicators of Public and Publicly
Guaranteed External Debt, 2023–2033
(In percent)
Projections 1/
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
PV of debt-to GDP ratio

Baseline 42 43 43 43 37 30 24 20 17 15 14
A. Alternative Scenarios
A1. Key variables at their historical averages in 2023-2033 2/ 42 35 23 10 -4 -9 -4 5 12 21 30
0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
B. Bound Tests
B1. Real GDP growth 42 45 48 48 42 33 27 22 19 17 15
B2. Primary balance 42 51 60 60 54 46 39 34 30 28 26
B3. Exports 42 54 70 70 62 52 45 38 34 31 28
B4. Other flows 3/ 42 50 57 57 50 42 36 30 26 24 22
B5. Depreciation 42 53 45 45 39 30 24 19 15 13 12
B6. Combination of B1-B5 42 54 57 57 50 41 34 29 25 23 20
C. Tailored Tests
C1. Combined contingent liabilities 42 55 55 55 49 41 35 29 26 24 22
C2. Natural disaster 42 50 50 51 45 37 31 27 24 22 21
C3. Commodity price 42 43 43 43 37 30 24 20 17 15 14
C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Threshold 30 30 30 30 30 30 30 30 30 30 30
PV of debt-to-exports ratio
Baseline 100 106 108 110 87 66 54 43 36 33 30
A1. Key variables at their historical averages in 2023-2033 2/ 100 86 59 25 -9 -21 -9 10 25 45 65
0 100 117 131 145 125 107 97 86 73 65 56
B. Bound Tests
B1. Real GDP growth 100 106 108 110 87 66 54 43 36 33 30
B3. Exports 100 165 276 280 224 178 153 126 111 103 95
B4. Other flows 3/ 100 124 145 147 117 92 79 64 56 52 48
B5. Depreciation 100 106 90 92 72 53 42 32 26 23 20
C. Tailored Tests
Threshold 140 140 140 140 140 140 140 140 140 140 140
Debt service-to-exports ratio
Baseline 7 8 8 8 10 13 9 7 7 5 5
A1. Key variables at their historical averages in 2023-2033 2/ 7 8 8 7 10 16 11 10 9 6 4
0 7 8 8 9 13 18 13 11 12 10 10
B. Bound Tests
B1. Real GDP growth 7 8 8 8 10 13 9 7 7 5 5
B3. Exports 7 10 14 16 20 26 18 14 14 14 13
B4. Other flows 3/ 7 8 8 9 11 14 10 8 8 7 7
B5. Depreciation 7 8 8 7 10 13 9 7 6 4 4
C. Tailored Tests
Threshold 10 10 10 10 10 10 10 10 10 10 10
Debt service-to-revenue ratio

Baseline 13 12 12 11 16 23 16 14 13 10 9
0 13 12 13 13 20 30 23 22 22 19 18
B. Bound Tests
B1. Real GDP growth 13 13 13 13 18 26 18 15 15 11 10
B3. Exports 13 13 14 16 20 28 20 17 18 16 15
B4. Other flows 3/ 13 12 13 13 17 24 17 15 15 13 12
B5. Depreciation 13 15 15 13 19 28 19 17 16 10 9
C. Tailored Tests
Threshold 14 14 14 14 14 14 14 14 14 14 14

1/ A bold value indicates a breach of the threshold.
2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.
3/ Includes official and private transfers and FDI.

Table 4. Mozambique: Sensitivity Analysis for Key Indicators of Public Debt, 2023–20331/
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
PV of Debt-to-GDP Ratio
Baseline 67 67 66 65 55 44 36 28 22 18 13
0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
B. Bound Tests
B1. Real GDP growth 67 72 77 78 69 58 51 43 38 35 32
B3. Exports 67 75 86 84 73 60 51 42 35 30 24
B4. Other flows 3/ 67 75 81 79 68 56 47 39 32 27 22
B5. Depreciation 67 73 70 67 56 44 37 28 21 15 10
C. Tailored Tests
TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35
PV of Debt-to-Revenue Ratio
Baseline 244 253 244 234 194 157 132 107 86 67 49
0 25 36 39 43 44 50 39 35 34 25 20
B. Bound Tests
B1. Real GDP growth 244 271 282 279 241 206 185 164 147 133 120
B3. Exports 244 281 317 304 256 214 188 160 137 113 91
B4. Other flows 3/ 244 282 299 287 241 200 174 147 124 101 81
B5. Depreciation 244 277 259 243 198 156 136 107 82 59 37
C. Tailored Tests
Debt Service-to-Revenue Ratio
Baseline 25 34 35 38 35 36 27 22 20 13 9
0 25 36 39 43 44 50 39 35 34 25 20
B. Bound Tests
B1. Real GDP growth 25 36 40 43 40 42 33 27 25 18 14
B3. Exports 25 34 36 41 37 38 29 24 22 17 13
B4. Other flows 3/ 25 34 36 40 36 38 29 23 22 16 12
B5. Depreciation 25 34 36 39 37 40 30 25 22 14 10
C. Tailored Tests

1/ A bold value indicates a breach of the benchmark.
2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.
3/ Includes official and private transfers and FDI.

Figure 3. Mozambique: Drivers of Debt Dynamics - Baseline Scenario

External Debt
Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/
(in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP)
Current DSA
150
120 Residual 250
Previous DSA
proj. 100 200
DSA-2015 Interquartile
100 range (25-75)
Price and 150
exchange rate50
80 100
Real GDP
growth 0 50 Change in PPG
60 debt 3/
0
Nominal -50
40 interest rate -50
-100 Median
-100
20 Current
account + FDI -150
0 -150
-200
Change in 5-year 5-year
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
PPG debt 3/ Contribution of Distribution across LICs 2/

historical projected -250 unexpected
change change
Public debt
Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/
(in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP)
Residual 40
Current DSA
Previous DSA proj. 30
DSA-2015 Interquartile
140 Other debt 20 25 range (25-75)
creating flows
120 20
Real Exchange
rate 0 15
100 depreciation
10
80 Real GDP
Change in debt
growth -20
5
60
Real interest
rate
0
40 -40
-5
Primary deficit
20
-60 -10 Median
0 Change in debt 5-year 5-year -15 Distribution across LICs 2/
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
historical projected Contribution of

-20 unexpected
change change
1/ Difference between anticipated and actual contributions on debt ratios.

2/ Distribution across LICs for which LIC DSAs were produced.
3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt
dynamics equation.

Figure 4. Mozambique: Realism Tools

3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/
(Percentage points of GDP)
8 3
14 Distribution 1/
7
12
Projected 3-yr adjustment 6
3-year PB adjustment greater
In percentage points of GDP

5
than 2.5 percentage points of 2
10
GDP in approx. top quartile 4
In percent
8 3
2
6 1
1
4 0
-1
2
-2 0
0
2017 2018 2019 2020 2021 2022 2023 2024
Baseline Multiplier = 0.2 Multiplier = 0.4
more
-4.5
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Multiplier = 0.6 Multiplier = 0.8
1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real
size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is GDP growth paths under different fiscal multipliers (left-hand side scale).
found on the vertical axis.
Public and Private Investment Rates Contribution to Real GDP growth

(percent of GDP) (percent, 5-year average)
80 10
75
9
70
65 8
60
55 7
50
6
45
40 5
35
4
30
25 3
20
2
15
10 1
5
0 0
Historical Projected (Prev. DSA) Projected (Curr. DSA)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors
Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital

Table 5. Mozambique: Decomposition of Public Debt and Debt Service by Creditor, 2022–241
Debt Stock (end of period) Debt Service

2022 2022 2023 2024 2022 2023 2024
(In million US$) (Percent total debt) (Percent GDP) (In million US$) (Percent GDP)
Total 18016.7 100.0 94.1 1190.8 2268.4 1551.1 7.2 11.8 7.1
2
External 13610.1 75.5 71.1 430.8 562.7 738.9 2.6 2.9 3.4
3
Multilateral creditors 5039.5 28.0 26.3 163.8 166.0 224.7 1.0 0.9 1.0
IMF 592.0 3.3 3.1
World Bank 3016.9 16.7 15.8
ADF 886.2 4.9 4.6
Other Multilaterals 544.4 3.0 2.8
o/w : IDB 160.4 0.9 0.8
IFAD 130.0 0.7 0.7
BADEA 87.8 0.5 0.5
EBI 86.5 0.5 0.5
Bilateral Creditors 4288.6 23.8 22.4 222.2 351.9 410.9 1.3 1.8 1.9
Paris Club 1148.8 6.4 6.0 35.7 54.3 64.5 0.2 0.3 0.3
o/w: Japan 399.7 2.2 2.1
Korea 245.3 1.4 1.3
Brazil 193.2 1.1 1.0
France 148.2 0.8 0.8
Non-Paris Club 3139.7 17.4 16.4 186.5 297.6 346.4 1.1 1.6 1.6
o/w: China 1717.6 9.5 9.0
Portugal 485.5 2.7 2.5
Libya 253.4 1.4 1.3
India 241.4 1.3 1.3
Iraq 230.6 1.3 1.2
Bonds 900.0 5.0 4.7 44.9 44.9 45.0 0.3 0.2 0.2
Commercial creditors 50.5 0.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0
o/w: Senior creditors of LNG debt financing 43.0 0.2 0.2
Other international creditors 3331.5 18.5 17.4 0 46.5 22.8 0.0 0.2 0.1
4
o/w: ENH's LNG project partners 3331.5 18.5 17.4
5
Domestic 4406.6 24.5 23.0 760 1706 812 4.6 8.9 3.7
Held by residents, total
Held by non-residents, total
T-Bills 1094.0 6.1 5.7
Bonds 2254.5 12.5 11.8
Loans 1058.2 5.9 5.5
Memo items:
6
Collateralized debt 0 0.0
o/w: Related 0 0.0
o/w: Unrelated 0 0.0
Contingent liabilities 43.0 0.2 0.2
o/w: Public guarantees 43.0 0.2 0.3
Nominal GDP (millions US$) eop exchange rate 16082 18969 21426
1
As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA, except the
stock of domestic debt does not include state-owned enterprise equivalent to 1.4 percent of GDP.
2
External debt data are IMF estimates.
3
Multilateral creditors” are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF policies
(e.g. Lending Into Arrears)
4
Annual interest due are capitalized until beginning of project production.
5
Debt service in 2021 does not include amortization of T-bills.
6
Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the
asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender
as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to
finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for
Public Lenders and Borrowers” for a discussion of issues raised by collateral.

SECOND REVIEW UNDER THE THREE-YEAR
July 5, 2023 ARRANGEMENT UNDER THE EXTENDED CREDIT
FACILITY, REQUESTS FOR MODIFICATION OF THE
MONETARY POLICY CONSULTATION CLAUSE,
WAIVERS OF NONOBSERVANCE FOR QUANTITATIVE
PERFORMANCE CRITERIA, AND FINANCING
ASSURANCES REVIEW—SUPPLEMENTARY
INFORMATION
Prepared By African Department
This statement provides information that has become available since the issuance of the
Staff Report for the Second Review under the Extended Credit Facility (EBS/23/74) relating
to fulling the two prior actions under this review. The thrust of the Staff Report remains
unchanged.
1. The authorities met both prior actions under the second review of the Extended
Credit Facility. On May 30, the Parliament approved amendments to the wage bill law,
adjusting the percentage of the reference salary that is applied to the calculation of the
representation subsidy, for statutorily appointed and elected holders of public office. In
addition, based on data provided by the authorities on June 29, 2023, the Resident
Representative office assessed that the prior action on incorporating all public sector servants
into the electronic payroll system has been met. These were the two prior actions for the
second review under the ECF listed in Table 2 of the Memorandum of Economic and Financial
Policies (MEFP).

Statement by Mr. Willie Nakunyada, Executive Director for Mozambique; Mr. Adriano
Isaias Ubisse, Alternate Executive Director; and Mr. Jorge Essuvi, Senior Advisor to
Executive Director
July 6, 2023
Introduction
1. Our Mozambican authorities thank staff for their constructive engagement during the
mission on the second review of the Extended Credit Facility (ECF) arrangement. They
broadly share the staff’s assessment of policy priorities and challenges.
2. The post-pandemic economic recovery momentum in Mozambique is gathering pace,

despite the devastating effects of frequent and increasingly severe climate shocks.
Specifically, the shock from Cyclone Freddy experienced earlier this year, resulted in the
loss of lives and destruction of key infrastructure, as well as the outbreak of persistent
water borne diseases such as cholera. Nevertheless, the authorities have made determined
efforts to keep the Fund-supported ECF program on-track, despite strong headwinds from
domestic and external challenges. They have taken decisive actions to address fiscal
slippages and delivered on their structural benchmarks. Over the medium-term, the
authorities are committed to sustained fiscal consolidation efforts, to ensure fiscal and
debt sustainability. Importantly, the authorities view the ECF arrangement as
instrumental to help realize the key objectives of their Five-Year Government Program
2020–2024 designed to safeguard macroeconomic stability, consolidate public finances,
and reduce poverty and social inequalities, while creating a conducive environment for
private sector development and employment creation.
Program Performance
3. Two out of four Quantitative Performance Criteria (QPCs) were met. The QPC on the
floor of the domestic primary budget balance was not met due to the wage bill overrun
and revenue underperformance. Further, the ceiling on non-accumulation of new external
arrears was not met, as the government incurred delays of over 30 days to service the
debt of a state-owned enterprise (SOE). The authorities have since taken corrective
revenue and expenditure measures to address the fiscal slippages. At the same time, the
recently accumulated external arrears have been settled, and the authorities have
instituted administrative measures to avoid the re-accumulation of arrears.

2
4. To address the overshooting of the wage bill, the authorities adopted measures to reduce
the wage bill, including through amendments to the wage bill act, which was approved by
the National Assembly in May 2023, in line with the respective prior actions. This
legislative change also gave effect to the integration of all civil servants including the
special sectors’1 personnel into the wage bill. In the medium-term, the authorities plan to
achieve the 10 percent of GDP wage bill target with support from Fund TA.
5. The Indicative Target (IT) on the present value of new external debt was met, but the IT
on the social spending floor and the ceiling on domestic debt stock were missed. To
address capacity constraints at the National Institute for Social Action (INAS) that
affected performance under the IT on social spending, the authorities are putting in place
an action plan to improve efficiency through digitalization and cash controls.
Concurrently, the authorities have instituted appropriate corrective actions to avoid future
breaches on the debt stock ceiling, including clearing the debt database ahead of the
migration to the new debt database.
6. Reflecting the lower-than anticipated inflation, the Monetary Policy Consultation Clause
was breached. With inflation declining for the fourth consecutive month to 10.3 percent
at end-December 2022, below the lower bound of the inflation band of 12.0 percent, the
consultation clause was triggered under the program. According to the central bank, these
price developments were underpinned by the lower-than anticipated transmission of high
international fuel prices to domestic pump prices, as well as the authorities’ proactive
tightening of monetary policy to bring inflation down.
7. Four out of five Structural Benchmarks (SBs) were met. The e-SISTAFE (the public
finance management system) tools for budgetary planning (annual) and for financial
programming (quarterly) were fully implemented in all spending units at end-2022; the
submission to Parliament of the law on the Sovereign Wealth Fund was met, as well as
the SB on exemptions from attrition rules for civil servants in the 2023 budget. However,
the SB on implementing the proposed elimination of VAT exemptions and zero-ratings
identified through the 2022 prior action was not met due to the decision taken by
Parliament to extend some exemptions to end-2023. Considering the remedial
measures, prior actions, and progress made in implementing structural reforms, the
authorities seek Executive Directors’ support in completing the second review under
the ECF program, and the associated requests.
Recent Economic Developments and Outlook
8. Real GDP growth is projected to accelerate from 4.2 percent in 2022 to 7.0 percent in
2023, underpinned by the broad-based recovery in agriculture and the services sector, as
the pandemic subsided. Moreover, the commencement of LNG production in October
2022, under the ENI-led Coral South project, improved security conditions in the North,
and increased LNG gas investments are expected to provide strong growth impetus from
1 Special sectors include the security and defense forces.

3
2023 onwards. Meanwhile, inflation decelerated from a peak of 12.10 percent in August
2022 to 7.06 percent in May 2023, driven by lower food and gasoline prices. Going
forward, inflation is projected to further moderate to 6.7 percent by end-2023, benefitting
from tight monetary conditions and receding commodity prices.
9. The current account deficit widened significantly from 22.4 percent of GDP in 2021 to
32.9 percent of GDP in 2022 due to LNG project-related imports. Higher fuel prices also
shored-up imports, triggering a steady decline in international reserves, from 4.5 months
of goods and services (excluding megaprojects) in 2021 to 3.4 months in 2022. Looking
ahead, the expected export earnings from LNG gas, and the moderation of food and
energy imports, is projected to improve current account performance and strengthen
external reserve buffers.
Fiscal Policy and Debt Management
10. The authorities have undertaken bold measures to restore budget credibility and ensure
fiscal discipline. To rectify the wage bill overrun following the implementation of the
Tabela Salarial Única – TSU (single wage bill table) that started in October 2022, the
government has undertaken several measures including the revision of the wage bill law
to deliver on fiscal objectives as articulated in the 2023 National Budget. Specific
measures undertaken by the government include: i) the reduction in the nominal wage
levels relative to the original TSU framework; ii) freezing new hires in the special
sectors; iii) canceling the 13th paycheck; iv) introducing the payroll of the special sectors
into the system; and v) audit of all civil servants including from the special sectors to
eliminate irregularities, including potential ghost workers. Going forward, monitoring
instruments, including monthly wage bill reporting, regular audits and proof of life will
be adopted to avoid wage bill slippages. Reflecting these remedial measures, the
authorities seek to reduce the wage bill from 16.4 percent to 14.6 percent of GDP by the
end-2023. Meanwhile, the authorities are implementing additional measures to bring the
wage bill to around 10 percent of GDP over the medium-term, consistent with the
program objectives.
11. The authorities are making concerted efforts to strengthen tax collection, including by
reforming the VAT, and enhancing the tax administration capacity. They are gradually
phasing out some of the VAT exemptions and domestic zero-ratings while broadening the
VAT base. Further, the authorities are implementing measures to modernize tax
administration, including i) enhancing links and interoperability with other public
registries to boost revenue collection; ii) cleaning and updating the taxpayer’s registry,
including removing duplicated taxpayers; and iii) implementing an integrated electronic
tax filing system (e-tributação) to collect receipts from the most important taxes,
including VAT and income taxes. Moreover, the authorities are committed to adopting
best international practices in determining the tax base for the mining industry.
12. The government has laid the groundwork for the adoption of a fully-fledged automatic
fuel price-adjustment mechanism. In this vein, the authorities are implementing structural
procedures to reduce costs of storage and distribution of fuel, including scaling down of

4
port operation fees. To cushion vulnerable households from the effects of the fuel subsidy
removal, the authorities are strengthening social protection by increasing the envelope
and the number of beneficiaries, improving efficiency through digitalization, and
enhancing cash controls by reconciling payments with e-SISTAFE.
13. The government continues to implement the Medium-Term Debt Strategy (MTDS) aimed
to place public debt on a sustainable footing. To this end, they are committed to follow a
prudent borrowing strategy for public investment projects, by prioritizing projects under a
tight and secured financing envelope. Importantly, the authorities are prioritizing
concessional financing, and refraining from contracting new debt to finance non-priority
investments.
14. The authorities are stepping up efforts to strengthen debt management, including by
capping the state-owned enterprises (SOEs) debt levels. To this end, they have made
strides in strengthening SOE debt management practices through improving monitoring,
mapping all existing SOEs and their subsidiaries and regularly publishing their
consolidated reports. Furthermore, the authorities are committed to enhancing the
sustainability and transparency of the public sector debt and by publishing detailed
quarterly public sector debt reports containing stock levels, intra-agency on-lending, and
government guarantees.
Monetary, Exchange Rate, and Financial Sector Policies
15. The Banco de Moçambique (BM) has taken pro-active monetary tightening actions that
have brought inflation down to levels below the MPCC. Going forward, the central bank
is committed to a cautious approach to monetary policy normalization while maintaining
exchange rate flexibility to absorb external shocks. Should inflationary pressures persist,
the BM stands ready to further tighten monetary conditions. Furthermore, the BM will
continue to refine its framework to implement a forward-looking monetary policy
framework based on the policy interest rate (MIMO) to signal its monetary policy stance,
while advancing progress on the transition to an inflation targeting regime.
16. The BM is introducing policies to help develop the FX market over the medium-term,
including by fostering better price discovery. The determination of the reference
exchange rate is being revised to capture actual volume-weighted market transactions
rather than quoted rates and its implementation is subject to the BM’s new IT system
going live. To further foster the integrity and effective functioning of the FX market, the
BM is adhering to the FX Global Code as a first step to ensure alignment with market
participants. Meanwhile, the BM’s FX allocations will be limited to the smoothening of
disorderly market conditions.
17. The banking sector has remained broadly resilient to shocks, but the authorities remain
attentive to the recent declines in capital and liquidity ratios. At the same time, the BM
will continue implementing prudential rules to support the safety and soundness of the
banking system and ensure adherence to loan classification and provisioning standards.
Moreover, the BM is revising the prudential regulations to allow for the smooth transition

5
from Basel II to Basel III capital accords. With Fund technical support, the BM is
developing the regulatory and supervisory framework for cybersecurity risks
management, including through on-site assessments. Further, the BM finalized and
approved the manual for AML/CFT risk-based supervision. In addition, following
enactment of the Basic Bank Account Law that simplifies the requirements and reduces
the costs of opening bank accounts for low-income households, the authorities continue
to make progress in implementing their 2016-2022 National Financial Inclusion Strategy.
Notable progress has also been made in implementing the recommendations of the 2020
safeguards assessment.
Governance and Structural Reforms
18. To bolster financial integrity and accelerate exit from the FATF grey list, the authorities
have stepped up implementation of the action plan to address identified AML/CFT
deficiencies. Following the amendments introduced in the AML/CFT legislation, the
authorities are implementing measures to address the 40 recommendations by the Eastern
and Southern Africa Anti-Money Laundering Group (ESAAMLG). Specifically, they are
addressing issues related to beneficial ownership, tackling AML risks in non-
governmental organizations, and strengthening human and institutional capacity of the
financial information unit (GIFiM), the Attorney General’s Office (AGO), and other anti-
corruption agencies. In addition, the AGO is concluding the draft bill to introduce
amendments to the Public Probity Law to clarify the definition of public agent, strengthen
the definition of conflict of interest, and establish published procedures for its reporting.
19. The government is taking steps to promote the transparent and accountable management
of LNG resources and ensure inter-generational equity. In this vein, the authorities are
designing a sovereign wealth fund (SWF) to effectively manage natural resource flows.
Following public consultations, a draft law establishing the SWF has been submitted to
Parliament. The SWF will internalize a fiscal rule determining the portion of the
resources to be earmarked for budgetary purposes.
20. Improving transparency in the implementation of the budget ranks high on the
authorities’ near-term priorities. In this vein, the government is setting-up both an
interdepartmental cash management committee for financial program decision making,
and a cash management unit within the Treasury to forecast and manage cash flows.
Additionally, they plan to enhance the coverage and functioning of the treasury single
account, beginning with the full mapping of all public sector bank accounts. Treasury’s
cash management will also be enhanced leveraging on the forecasting tool being
developed within the e-SISTAFE.
Climate Change and Adaptation Policies

21. Mozambique is susceptible to increasingly large and frequent climate shocks, ranging
from devastating floods precipitated by recurring tropical cyclones, to severe droughts.
As such the authorities attach a high premium on policies to enhance climate resilience.
Moreover, the Natural Disasters Management Law 15/2014 provides a general
framework for preventive measures and integrating adaptation responses into

6
development planning. The authorities’ long-term policy plans are guided by the National
Climate Change Strategy ENAMMC 2013-2025 and the Master Plan for Risk and
Disaster Reduction 2017-2030. In this connection, they are considering financing under
the Resilience and Sustainability Trust (RST) and view it as instrumental in catalyzing
additional climate financing. The authorities are also working to develop a climate
finance protection strategy geared to efficiently finance post-disaster investments in
climate-resilient infrastructure.
Conclusion
22. The authorities remain firmly committed to their reform agenda aimed at restoring
macroeconomic stability and enhancing sustainable and inclusive growth. They are
determined to continue implementing appropriate fiscal, monetary, and structural policies
to set the economy on an accelerated growth path. Importantly, they appreciate the
continued Fund engagement and policy advice and look forward to the Executive
Directors’ support towards completion of the second review under the ECF arrangement.

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IMF Country Report No.

• A Press Release including a statement by the Chair of the Executive Board.

• A Staff Supplement updating information on recent developments.

• A Statement by the Executive Director for the Republic of Mozambique

Copies of this report are available to the public from

IMF Executive Board Completes the Second Review under the

• The three-year ECF arrangement aims to support Mozambique’s economic recovery,

©International Monetary Fund. Not for Redistribution

“Economic recovery in Mozambique is strengthening, supported by the liquified natural gas

Continued program ownership by the authorities complemented with capacity development

©International Monetary Fund. Not for Redistribution

2019 2020 2021 2022 2023

Sources: Mozambican authorities; and IMF staff estimates and projections.

©International Monetary Fund. Not for Redistribution

©International Monetary Fund. Not for Redistribution

PROGRAM PERFORMANCE _____________________________________________________________________ 4

RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK ________________________________________ 5

POLICY DISCUSSIONS ___________________________________________________________________________ 7

PROGRAM MODALITIES AND OTHER ISSUES ________________________________________________ 13

STAFF APPRAISAL _____________________________________________________________________________ 16

2 INTERNATIONAL MONETARY FUND

©International Monetary Fund. Not for Redistribution

INTERNATIONAL MONETARY FUND 3

©International Monetary Fund. Not for Redistribution

2. General elections are scheduled for October 2024, against a backdrop of an

• The end-December 2022 PC on net international reserves, the PC on non-concessional

4 INTERNATIONAL MONETARY FUND

©International Monetary Fund. Not for Redistribution

RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK

INTERNATIONAL MONETARY FUND 5

©International Monetary Fund. Not for Redistribution

Text Figure 2. Inflation and Related Developments

Sources: Authorities’ data and IMF Staff calculations.

6 INTERNATIONAL MONETARY FUND

©International Monetary Fund. Not for Redistribution

containing imported inflationary

INTERNATIONAL MONETARY FUND 7

©International Monetary Fund. Not for Redistribution

eliminated the 13th-month wage. Wage Bill Reducing Measures

8 INTERNATIONAL MONETARY FUND

©International Monetary Fund. Not for Redistribution

B. Reducing Debt Vulnerabilities and Preparing for LNG Revenues

INTERNATIONAL MONETARY FUND 9

©International Monetary Fund. Not for Redistribution

15. External arrears. The authorities

constraints; they have since been

10 INTERNATIONAL MONETARY FUND

©International Monetary Fund. Not for Redistribution

C. Monetary and Exchange Rate Policy

INTERNATIONAL MONETARY FUND 11

©International Monetary Fund. Not for Redistribution

D. Financial Stability and Financial Inclusion

24. Progress in strengthening the Tribunal Administrativo (TA) to improve the

25. Additional governance reforms should help reduce vulnerabilities corruption.

12 INTERNATIONAL MONETARY FUND

©International Monetary Fund. Not for Redistribution

Mozambique’s inclusion on the FATF list of jurisdictions under increased monitoring

• Public Financial Management (PFM). A renewed PFM strategy to strengthen budget

PROGRAM MODALITIES AND OTHER ISSUES

• An additional adjustor is proposed to accommodate for shortfalls or gains in project