1MOZEA2022001

IMF Country Report No.
22/358
THE REPUBLIC OF MOZAMBIQUE

FIRST REVIEW UNDER THE THREE-YEAR
December 2022 ARRANGEMENT UNDER THE EXTENDED CREDIT
FACILITY, AND REQUEST FOR MODIFICATION OF THE
MONETARY POLICY CONSULTATION CLAUSE, AND
FINANCING ASSURANCES REVIEW—PRESS RELEASE;
STAFF REPORT; AND STATEMENT BY THE EXECUTIVE
DIRECTOR FOR THE REPUBLIC OF MOZAMBIQUE
In the context of the First Review Under the Three-Year Arrangement Under the Extended
Credit Facility, and Request for Modification of the Monetary Policy Consultation Clause,
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 November 21, 2022, following discussions that ended on
September 16, 2022, 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 November 4, 2022.
• 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.
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© 2022 International Monetary Fund

PR22/403
IMF Executive Board Concludes the First Review under the

Extended Credit Facility Arrangement for the Republic of
Mozambique
FOR IMMEDIATE RELEASE
• The IMF Executive Board completed the first review under the Extended Credit
Facility (ECF) arrangement for Mozambique, providing the country with access to
SDR 45.44 million (about US$59.26 million).
• The three-year ECF arrangement aims to support the economic recovery, reduce
public debt and financing vulnerabilities, and foster higher and more inclusive growth
through structural reforms.
• All end-June 2022 program performance criteria, indicative targets and the structural
benchmark were met. The monetary policy stance and proactive tightening since early
2021 are deemed appropriate to address higher than expected inflation.
Washington, DC — November 21, 2022: The Executive Board of the International Monetary
Fund (IMF) concluded the first review under the three-year ECF arrangement for
Mozambique.1 The Board also completed the financing assurances review and approved the
authorities’ request for modification of conditionality. 2 This allows for the immediate
disbursement of SDR 45.44 million (about US$59.26 million), usable for budget support,
bringing Mozambique’s total disbursements under the ECF arrangement to SDR 113.6 million
(about US$150million).
Growth is projected to increase in 2022, with the strengthening economic recovery despite the
worsening international economic environment and rising commodity prices, reflecting a
strong vaccination campaign and full lifting of COVID-related restrictions in July 2022. Inflation
has risen to double digits, driven by global fuel and food prices and tropical storms that
impacted domestic food supply in the second quarter. Fiscal developments in 2022 are
broadly aligned with expectations, with strong revenue and contained spending. Large
liquef ied natural gas (LNG) investments are driving the current account. The f irst LNG project
started production in November 2022. Program implementation has been strong, despite the
challenging environment, with completion of important program commitments in the areas of
f iscal governance and anti-corruption.
Risks to the outlook are significant but balanced. Passthrough of fuel and food inflation to
other prices, social unrest, terrorism activity in the north and natural disasters are downside
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).
risks, balanced by upside risks from the strengthening recovery, strong prospects for LNG
demand, and scope for higher-than-expected non-LNG growth in the medium-term.
Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director and Acting
Chair, made the f ollowing statement:
“The economic recovery is strengthening, supported by a successful COVID vaccination

campaign. Program performance has been strong, with all quantitative targets and the
structural benchmark met at end-June. While the outlook remains positive, driven by large
liquef ied natural gas (LNG) projects, significant risks remain, including from adverse climate
events and fragile security situation. Governance weaknesses and debt vulnerabilities also
pose challenges. In that context, continued capacity development and donor support remain
imperative for Mozambique to achieve its development objectives.
“Solid revenue performance and spending restraint helped align fiscal outcomes with program
objectives. The authorities’ fiscal policy reforms will contribute to medium-term fiscal
consolidation. A broader VAT base will help secure buoyant and diversified revenues
independent of commodity prices. Reforming public sector remuneration will improve
ef f iciency in delivering public services and create space for other spending priorities over time.
Revenue administration and public financial management reforms are also essential to
achieve f iscal policy objectives.
“The draf t Sovereign Wealth Fund law is a welcome step to develop a transparent,
accountable, and efficient framework for managing LNG receipts. Additional efforts are
needed to mitigate revenue volatility, continue strengthening public investment management,
and integrating natural resource revenues into the broader fiscal framework.
“The monetary policy stance and proactive tightening since early 2021 are appropriate to
manage inf lation expectations. The Monetary Policy Consultation Clause (MPCC) upper
inf lation band was breached due to the rise in global fuel and food prices and the impact of
domestic floods on food production. Continued caution is warranted to ensure adherence to
program targets on reserves going forward. Additional exchange rate flexibility would help
absorb external shocks.
“Progress continues across the governance and anti-corruption agenda. The authorities are
implementing their action plans to address shortfalls in the AML/CFT f ramework and
Mozambique’s grey listing by the Financial Action Task Force. Amending the public probity
law and continued implementation of recommendations from the audit of COVID spending are
near-term priorities.
“The climate policy agenda is being articulated and efforts should continue in integrating
climate resilience criteria in public investment and project selection.”
Table 1. Mozambique: Selected Economic Indicators, 2019–23
2019 2020 2021 2022 2023

National Income and Prices
Nominal GDP (MT billion) 963 983 1,033 1,142 1,292
Real GDP growth (percentage change) 2.3 -1.2 2.3 3.8 5.0
Consumer price index (percentage change, 3.5 3.5 6.7 15.0 8.5
end of period)
Government Operations (percent of GDP)
Total revenue 29.0 23.9 25.7 25.7 25.9
Total expenditure and net lending 29.8 32.9 31.5 33.2 33.3
Overall balance, after grants 0.3 -5.4 -4.8 -3.7 -3.9
Primary Balance after grants 3.5 -2.3 -2.1 -0.2 -0.7
Public sector debt 99.0 120.0 107.0 102.9 101.4
of which: external 79.4 97.8 82.8 77.6 75.9
Money and Credit
Reserve money (percentage change) 19.1 9.0 -14.4 -5.1 11.2
M3 (Broad Money) (percentage change) 12.1 23.6 2.8 2.3 11.8
Credit to the economy (percentage change) 5.0 14.8 3.0 3.0 11.5
Credit to the economy (percent of GDP) 24.0 27.0 26.5 24.6 24.3
External Sector (percentage change)
Merchandise exports -10.2 -23.1 55.6 38.9 -2.5
Merchandise exports, excluding 8.3 -22.0 42.7 14.7 8.6
megaprojects
Merchandise imports 9.5 -12.9 33.2 70.1 -35.5
Merchandise imports, excluding 9.3 -4.5 37.8 10.2 -0.6
megaprojects
External current account, after grants -19.1 -27.3 -23.6 -41.5 -14.7
(percent of GDP)
Net international reserves (millions of U.S. 3,605 3,493 2,927 … …
dollars, end of period)
Gross international reserves (millions of U.S. 3,884 4,070 3,470 … …
dollars, end of period)
Sources: Mozambican authorities; and IMF staff estimates and projections.

REPUBLIC OF MOZAMBIQUE
FIRST REVIEW UNDER THE THREE-YEAR ARRANGEMENT
November 4, 2022 UNDER THE EXTENDED CREDIT FACILITY, AND REQUEST
FOR MODIFICATION OF THE MONETARY POLICY
CONSULTATION CLAUSE, AND FINANCING ASSURANCES
REVIEW
EXECUTIVE SUMMARY
Context. The economic recovery is strengthening, as a successful vaccination campaign
and recovery from COVID-related restrictions dominate headwinds from the worsening
international economic environment. Growth is projected at 3.8 percent this year, rising
to 5 percent in 2023 as the first liquefied natural gas (LNG) project enters production.
Food and fuel prices have pushed inflation to double digits. Monetary policy has been
proactive, including a further 200bps increase in the policy rate in September 2022.
Credit conditions remain tight, while financial sector buffers built before the pandemic
have underpinned banking sector resilience. Fiscal outcomes have been in line with
expectations. The current account deficit is lower than forecast (though it still widens
due to LNG infrastructure imports), as exports have been stronger than anticipated.
International reserves have declined faster than anticipated due to higher imported fuel
prices.
Outlook and risks. Risks from the conflict in the north of the country have abated
somewhat, with local populations beginning to return to affected areas. But security
risks and population displacement remain critical challenges. Natural disasters and
structural food insecurity are significant risks. The government has been passing
through international fuel price increases gradually and aims to put in place measures
to mitigate the impact of price rises on public transport users, while tight monetary
policy is expected to keep inflation expectations in check. Upside risks arise from the
strengthening recovery, strong prospects for LNG, and scope for higher-than-expected
non-LNG growth in the medium-term.
Program performance. All performance criteria, indicative targets and the structural
benchmark for end-June 2022 were met. The monetary policy consultation clause
(MPCC) inflation consultation band was breached in June 2022, reflecting higher
international food and fuel prices as well as the effects of floods in Mozambique. A
consultation letter is annexed to the staff report. Staff proposes a change to the
indicative target on the ceiling for the domestic debt stock to reflect delays in
disbursements of grants from a development partner and anticipation of issuance in
the second quarter given eased market conditions at that time. Progress continued across the
broader structural agenda, including in the fiscal and anti-money laundering areas. A minor
modification to the structural benchmark establishing quarterly commitment ceilings is proposed to
align the measure with practical implementation and moving the completion date from end-
December 2022 to end-January 2023. The target completion date for the structural benchmark on
the submission to Parliament of the Public Probity Law was moved from end-December 2022 to
end-June 2023.
Strategy and prospects. Macroeconomic prospects remain similar to program approval, and
performance criteria for the second review have not been modified. Key reforms will be finalized and
implemented for the second review, including with respect to the VAT, the public sector wage bill,
and public financial management. A sovereign wealth fund law expected to be submitted to
Parliament in November will help manage natural resource wealth efficiently and transparently.
2 INTERNATIONAL MONETARY FUND

Approved By An IMF team comprising Alvaro Piris (head), Samuel Delepierre, Mai
Abebe Selassie (AFR) Farid, Samuel Mann, Dominique Simard (all AFR), and Gaëlle Pierre
and Anna Ilyina (SPR) (SPR) held discussions with the Mozambican authorities during a
mission to Maputo September 5-16, 2022. 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; Edson Manguinhane,
local economist; and Béatrice Rangel, assistant. Jorge Essuvi (OED)
participated in some meetings. Research assistance was provided
by Jimena Montoya and Tebo Molosiwa. Ms. Fausa Aliu provided
secretarial assistance.
CONTENTS
CONTEXT __________________________________________________________________________________________________ 5
PROGRAM PERFORMANCE _____________________________________________________________________________ 5
RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK_____________________________________________ 6
POLICY DISCUSSIONS __________________________________________________________________________________10

A. Fiscal Policy and Structural Reforms _________________________________________________________________ 10
B. Reducing Debt Vulnerabilities ________________________________________________________________________ 13
C. Monetary and Financial Sector _______________________________________________________________________ 15
D. Structural Reforms ____________________________________________________________________________________ 16
PROGRAM MODALITIES AND OTHER ISSUES ______________________________________________________17
STAFF APPRAISAL_______________________________________________________________________________________19
BOX
1. The Fuel Price Setting Mechanism____________________________________________________________________ 9
FIGURES
1. Growth and Living Standards _________________________________________________________________________ 21
2. COVID-19 Pandemic, Growth and Inflation _________________________________________________________ 22
3. Monetary and Financial Developments ______________________________________________________________ 23
4. Selected External Sector Developments _____________________________________________________________ 24
5. Fiscal Developments___________________________________________________________________________________ 25
INTERNATIONAL MONETARY FUND 3

TABLES
1. Selected Economic and Financial Indicators, 2019–27______________________________________________ 26
2a. Government Finances, 2019–27 (Billions of Meticais) _____________________________________________ 27
2b. Government Finances, 2019–27 (Percent of GDP)_________________________________________________ 28
2c. Government Finances, 2019–27 (Percent of non-LNG GDP) ______________________________________ 29
3. Monetary Survey, 2019–2027_________________________________________________________________________ 30
4a. Balance of Payments, 2019–27 (Millions of U.S.)___________________________________________________ 31
4b. Balance of Payments, 2019–27 (Percent of GDP) __________________________________________________ 32
5. External Financing Needs and Sources, 2021-27____________________________________________________ 33
6. Financial Soundness Indicators for Commercial Banks and Deposit Takers, 2018–22 ___________ 34
7. Risk Assessment Matrix _______________________________________________________________________________ 35
8. Indicators of Capacity to Repay the Fund, 2022-2032______________________________________________ 36
9. Schedule of Disbursements Under the ECF Arrangement, 2022-2025 ____________________________ 37
10. Composition of Public Debt and Debt Service by Creditor, 2021-2023 _________________________ 38
ANNEX
I. Consultation with the IMF Executive Board on the Missed Inflation Target Under the MPCC___ 39
APPENDIX
I. Letter of Intent __________________________________________________________________________________________ 41
Attachment I. Memorandum of Economic and Financial Policies ______________________________ 44
Attachment II. Technical Memorandum of Understanding______________________________________ 62

CONTEXT
1. The three-year ECF arrangement aims to support the economic recovery, reduce public
debt and financing vulnerabilities, and foster higher and more inclusive growth through
structural reforms. The arrangement supports the government’s reforms to boost investment and
growth and reduce balance-of-payments (BOP) vulnerabilities through strengthening governance
and transparency, improving management of public and natural resources, mobilizing additional
revenue, and rebalancing expenditure. The country benefits from extensive capacity development
(CD) support from the IMF and other development partners.
2. The authorities’ proactive approach to vaccination contributed to low and stable

COVID cases, while the security situation in the north of the country has improved. The last
(fourth) peak in COVID infections in January 2022 (Figure 2) had mild mortality and economic
effects. Vaccination rates are among the highest in sub-Saharan Africa. Over 15 million people (42
and 97 percent of the total and target populations, respectively) had received at least one shot by
end-September 2022, and 40.9 percent of the population were fully vaccinated. 1 Terrorist attacks
starting in 2017 have caused thousands of deaths and displaced 945,000 people. While attacks
continue in isolated areas, the authorities’ military response supported by international partners and
reconstruction efforts have enabled the gradual return of the civilian population. Combined with the
effects of natural disasters, the security situation has contributed to increase the number of acutely
food insecure people to about 1.5 million (4.7 percent of the population). 2
PROGRAM PERFORMANCE
3. All performance criteria (PCs), indicative targets (ITs), and the structural benchmark
for end-June 2022 were met. The PCs on the floors on the domestic primary budget balance and
the stock of net international reserves of the Bank of Mozambique (BM) were met by wide margins,
and there was no newly contracted non-concessional external debt, nor accumulation of new public
and publicly guaranteed external payment arrears. The ITs on the present value of new external
debt, the ceiling on the domestic debt stock and the floor on social spending were also met. The
structural benchmark on the submission to parliament of anti-money laundering (AML) and
combating the financing of terrorism (CFT) legislation, was met.
4. Inflation breached the upper bound of the MPCC in June 2022, driven by higher food
and fuel prices. Inflation rose in the second quarter of 2022, reaching 10.8 percent in June,
reflecting international commodity price increases due to Russia’s war in Ukraine and related
sanctions, and flooding that affected domestic agricultural prices. The BM raised the policy rate
(MIMO) in March 2022 by 200 basis points to 15.25 percent, citing increases in expected inflation
and gathering economic momentum, and again by 200bp in September 2022. Since January 2021,
1
Our World in Data.
2
World Food Programme, Mozambique Country Brief, August 2022.

the BM has increased the policy rate by 700bp, and real interest rates are among the highest in the
region (Figure 3).
Text Table 1. Quantitative Program Performance at End-June 2022

End-June 2022 End-June 2022
QPC Adjusted QPC Actual
Performance Criteria
1/
Floor on domestic primary budget balance -2.6 3.8
2/
Ceiling on new non-concessional external debt contracted or guaranteed by the public sector 0 0
Floor on the stock of net international reserves of the BM (US$ millions) 2000 1,947 2,573
Ceiling on the accumulation of new public and publicly-guaranteed external payment arrears. (US$ million) 3/ 0 0
MPCC 4/5/
Inflation (upper-band, percent) 10.0
Inflation (mid-point, percent) 7.0 10.8
Inflation (lower-band, percent) 4.0
Indicative Targets IT
Present value of new external debt (US$ million) 6/ 89 0
Ceiling on domestic debt stock 7/ 253 256 251
8/
Floor on social spending 1.9 2.1
Memo item:
External concessional borrowing 0
Budget grants (US$ million) 52.6 52.6
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 the evaluation
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/
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).
RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK

5. The economic recovery
strengthened in the first half of 2022 (Text Text Figure 1. GDP Growth
Figure 1). Real GDP grew 4.6 percent year-on- (In Percent year-on-year)
year in Q2 2022, with services contributing 1.8
percentage points, reflecting the progressive
lifting of COVID-related restrictions completed
in July 2022 and despite the worsening
international economic environment and rising
commodity prices. The purchasing managers
index showed consistent expansion in
economic activity through September 2022
(Figure 2). Direct trade and investment links
with Ukraine and Russia are small. Growth is Sources: Authorities’ data and IMF Staff calculations

projected to reach 3.8 percent in 2022 (Text Table 2), rising to 5.0 percent in 2023 as the first LNG
project begins production (Coral South offshore platform). Staff forecasts two onshore LNG projects
to start production in 2027 and 2029 with positive impacts on growth from production, fiscal
revenues, and the current account.
Text Table 2. Medium-Term Macroeconomic Framework, 2022-2027
2022 2023 2024 2025 2026 2027

Proj.
(Annual percentage change)

Real GDP growth 3.8 5.0 8.3 5.1 5.0 15.6
GDP per capita (US$) 541 582 629 651 676 774
Consumer price index (end of period) 15.0 8.5 6.1 5.5 5.5 5.5
(In percent of GDP)
Current Account balance -41.5 -14.7 -35.5 -38.9 -40.9 -27.1
- excluding megaprojects and indirect imports -16.2 -19.3 -17.0 -16.5 -16.4 -16.2
Primary fiscal balance after grants -0.2 -0.7 0.0 0.8 2.3 3.1
Public sector debt 102.9 101.4 102.6 101.5 97.6 81.9
(In months of next year's non-megaproject imports)
Gross international reserves 3.7 3.8 4.2 4.3 4.9 5.0
6. Annual inflation reached 12 percent in August, remaining at that level in September.

The CPI components for diesel and gasoline prices increased by 42 percent and 26 percent,
respectively, between January and September 2022, despite gradual passthrough of international
fuel prices. Overall transport prices (fuels, vehicles, and transport services) contributed 3.8 per-
centage points to inflation in September (up from 1.4 percentage points in January). Reduced
domestic food supply and the increase in global food prices also raised inflation, contributing
5.9 percentage points. Inflation at end-2022 is projected at 15 percent, based on completion of the
adjustment of domestic to international fuel prices and passthrough to transport prices. Measures of
inflation excluding food and fuel prices remain around 5-7 percent year-on-year (Text Figure 2),
reflecting elastic labor supply, in line with the BM’s objective of “single digit” overall inflation.
7. Fiscal developments in 2022 are broadly aligned with expectations. The primary deficit
(after grants) for 2022 is estimated at -0.2 percent of GDP in line with program projections (Table
2b). The overall balance forecast widened by 0.1 percent of GDP compared to program projections,
to reach -3.7 percent of GDP.
8. Revenues remain strong. Total revenue is projected at 25.7 percent of GDP in 2022,
supported by overperformance of personal and corporate income tax collection (forecast at
10.7 percent of GDP). Modest declines in taxes on goods and services and non-tax revenue are
expected compared to 2021 (Figure 5).

Text Figure 2. Inflation and Related Developments

Core inflation has remained subdued… …while food and fuel pushed up headline CPI.
CPI and Commodity Prices

25
Brent (Spot Price f.o.b., Jan
270 2019=100)
Wheat (Kansas City Cash Price, 20
220 Jan 2019=100)
CPI (percent, yoy, rhs)
15
170
10
120
70 5
20 0
High inflation remains contained to few items… …and developments are in line with the wider region.
Inflation: Mozambique vs SSA

(Percent, yoy)
19
SSA Interquartile Range
Mozambique
14
SSA Median
-1
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
Oct-20
Apr-21
Oct-21
Apr-22
Sources: Authorities’ data and IMF Staff calculations.
1/ Core inflation calculated by National Statistics Institute (INE) excludes fruit, vegetables, and products with administered prices.
9. Expenditure pressures are being kept in check. Costs related to the humanitarian and
security situation in the north, social support payments (partly related to COVID support early in
2022), and the upfront cost of the public sector remuneration reforms of MT9.6 billion in 2022 have
contributed to pressures. However, overall expenditure has been maintained within the 2022
budget, reflecting lower investment spending (Text Table 3, Figure 5). The government is developing
plans to partially offset the impact of rising fuel prices on households identified as vulnerable by the
social security institute through cash transfers, and discounts at point of sale for public transport
users for a period of six months. As an interim measure while these schemes are rolled out, the price
per journey has not been adjusted in the Maputo metropolitan area, and a monthly transfer is paid
to registered public transport providers. Generalized fuel subsidies were eliminated in 2017 (Box 1).

Box 1. The Fuel Price Setting Mechanism

A rules-based approach to setting domestic fuel prices was adopted in 2017. Following reform of the
subsidy system and settlement of legacy debts, a new autonomous regulatory agency (ARENE) was created and a
fuel price rule linking domestic prices with economic costs implemented, with IMF and World Bank support. Fuel
imports are conducted through centralized tenders managed by IMOPETRO, a body with representatives from the
government, the regulator and fuel companies. The fuel import supplier is selected through a bi-annual
international competitive public tender, a process also managed by IMOPETRO.
ARENE regulates and supervises the price mechanism, reviewing prices monthly. The mechanism was
improved in 2019 to incorporate all fuel (petroleum product) import and storage costs.
• Variations of market prices within a three percent band do not lead to adjustments at the pump; a pump
price below or above breakeven within the band triggers contributions to or withdrawals from a stabilization fund.
• If price changes are within a band of three to 20 percent, ARENE adjusts pump prices automatically.
• For variations over 20 percent, the price setting decision is ceded to the Council of Ministers.
Responding to the large increase in international oil prices and fuel import costs in 2022 that exceeded 20
percent, the Council of Ministers is passing through cost increases only gradually. The policy was motivated
by the rise in living costs, including for vulnerable urban households dependent on public transport, and the risk
of social unrest. The response included voluntary agreements to temporary reductions in margins and fees across
all components of the cost price formula. Pump prices were also held below cost, and a liability of about $170 mil-
lion (1 percent of GDP) had accumulated by the stabilization fund at end-August 2022.
An agreement to settle this liability between the government and fuel distributors and return fully to the
rules-based system is expected. An agreement would likely incorporate a new contribution in the fuel price
structure to compensate the liability over time. Other fees and margins should be restored. Should international
prices fall consistently to levels below current pump prices, the government could decide to reduce prices, while
still incorporating the contribution to repay the liability.
10. Budget financing needs are covered

by international financial institutions and Text Figure 3. Trade in Goods
domestic debt. The World Bank approved (Million USD)
budget support (Development Policy
3000.0
Financing) of US$300 million in July 2022. The

2000.0
EU is expected to disburse a budget grant of

1000.0
0.0
US$50 million this year. Projected net -1000.0
domestic financing in 2022 is broadly -2000.0
unchanged from 2021 at 3.8 percent of GDP. -3000.0
Reliance on short-term T-bills has increased -4000.0
(to net issuance of 1.9 percent of GDP from -5000.0
1.3 in 2021). Use of US$163 million of the -6000.0
2021 SDR allocation reduced pressure on the -7000.0

Q1_2021 Q2_2021 Q3_2021 Q4_2021 Q1_2022 Q2_2022
debt market and interest costs, with limited

Exports - Megaprojects Exports - Non-Megaprojects
Imports - Megaprojects Imports - Non-Megaprojects
net issuance of longer-term bonds; use of a

further US$147 million of the SDR allocation in 2023 will support spending on social protection
(including displaced people) and alleviate domestic financing pressures. 3 The authorities remain
3 On-lending modalities are governed by a memorandum of understanding between the BM and the government,
stipulating that all associated costs and risks that may arise for the BM will be borne by the government.

committed to the transparency and accountability of budgetary execution, including financed by the
SDR allocation. Domestic debt markets remained tight, with coverage falling below full placement
on several occasions, despite high real interest rates (Tables 2a and 2b).
11. Large LNG investments are driving the current account. US$4.4 billion (25 percent of
GDP) in imports for the Coral South LNG project, including the offshore platform, were recorded in
the first quarter of 2022. Higher commodity prices and volumes increased exports, notably of coal
and electricity (Text Figure 3). The current account deficit for large, foreign investment-led natural
resource projects (“megaprojects”) is fully financed through trade credits and FDI. The non-
megaproject current account deficit has narrowed as the increase in imports, especially fuels, was
compensated by higher exports (prices and volumes for minerals and foods) and is expected to be
lower at end-2022 than 2021. Compared to program projections, the current account deficit is lower
due to the lower-than-expected trade deficit. Over the medium term, the differences in the current
account are driven by the one-year postponement of the resumption of onshore LNG projects.
12. Risks to the outlook are significant but balanced (Table 7). While inflation is driven by
exogenous shocks to food and fuel prices, passthrough to other prices or the emergence of wage
pressures would risk de-anchoring expectations and could contribute to social unrest. Natural
disasters related to climate change are a key risk as is intensification of terrorist activity in the north
of the country. Upside risks include the demand for LNG surpassing expectations over the medium-
term. Over the longer term, non-hydrocarbon growth may exceed the current conservative
projection of 4 percent.
POLICY DISCUSSIONS
Mitigating risks from rising international food and fuel prices while managing fiscal spending and
financing pressures are the main near-term challenge. Over the medium term, the program aims to set
debt on a declining path, rebalance fiscal and monetary policies, strengthen governance and combat
corruption, and improve management of public and natural resources.
A. Fiscal Policy and Structural Reforms
13. Budget execution is consistent with program objectives. Based on end-June 2022 data,
tax revenue is aligned with 2022 projections supported by robust personal and corporate income tax
collection. Current spending on subsidies and transfers is expected to be higher than in the program
(3.7 percent of GDP, versus 2.8 percent) partly reflecting fuel price support measures (¶9). Under-
execution of capital spending mainly reflects a shortfall in externally financed investment (by about a
quarter of the budgeted amount), with total capital spending for the year now estimated at 6.7 per-
cent of GDP. Overall, spending is expected to remain within budgeted ceilings (Text Table 3).
14. The authorities have announced an economic reactivation package to support post-
COVID economic recovery. The package (Pacote de Aceleração Económica—PAE), to be
implemented over 2023-24 aims to enhance the business environment by simplifying administrative

procedures and better aligning tax policy with development priorities. VAT reforms have been
modified to better align with policy priorities for private investment, the agricultural sector, and
renewables inputs (¶16).
15. The 2023 budget is aligned with program objectives. Revenues are forecast at 26 percent
of GDP, slightly stronger than in the program, reflecting income tax performance in 2022 and VAT
reform. Expenditure is also higher than originally envisaged (33 percent of GDP versus 31.8 percent
at program), with spending on goods and services expected to increase largely due to higher-than-
expected election-related costs for municipal (2023) and general (2024) elections. Investment
spending is expected to recover to 8.1 percent of GDP, in line with PAE priorities including on roads,
health and education, energy, water, and telecommunications. Primary balance (after grants) is
expected to be achieved in 2024, as in the original program.
Text Table 3. Mozambique: Government Finance, 2022-23

(Percent of GDP)
2022 2022 2023 2023

(Program Approval (Proj.) Program Approval (Proj.)
Total revenue 25.0 25.7 25.4 25.9

Tax revenue 20.6 21.8 20.6 21.8
Income and profits 10.5 10.7 10.5 10.7
Goods and services 7.3 8.2 7.3 8.2
VAT 6.4 7.4 7.3 7.9
Nontax revenue 4.4 3.9 4.3 4.0
Total expenditure and net lending 32.4 33.2 31.8 33.3

Current spending 24.7 26.1 24.2 24.8
Wage bill 14.2 14.6 14.2 14.1
Goods and services 4.2 4.4 4.2 4.5
Interest on public debt 3.4 3.5 3.0 3.2
Subsidies and transfers 2.8 3.7 2.8 3.0
Capital Spending 7.3 6.7 7.3 8.1
Net lending 0.4 0.4 0.4 0.4

Primary balance (after grants) -0.2 -0.2 -0.6 -0.7
Overall balance (after grants) -3.6 -3.7 -3.6 -3.9
Domestic primary balance 0.2 0.2 1.1 0.7
Memorandum items:
GDP (billions of Meticais) 1173 1142 1318 1292
Sources: Authorities and IMF staff projections.
16. VAT and wage bill reforms are proceeding.
• VAT reform. The reform aims to broaden the tax base and reduce distortions by eliminating
exemptions and zero-ratings. In line with PAE priorities, the authorities have (i) modified the
list of VAT exemptions agreed in the program to ensure agricultural and renewables inputs
remain exempt; and (ii) reduced the VAT rate by one percentage point to 16 percent in 2023

(compared to the half point cut in 2023, and a further half point cut in 2024, envisaged at
program approval), to bring the rate closer to neighboring countries. As originally planned,
the reform preserves exemptions on a ‘basic basket’ of goods and services consumed by
low-income households. To offset the revenue impact of the changes and retain the reform’s
objectives, the authorities are eliminating exemptions on additional domestic services, and
implementing an excise tax reform in addition. The net yield from the VAT and excise
reforms is 0.9 percent of GDP, versus 1.1 percent previously. The amended VAT law is
expected to be submitted to parliament in November 2022 (prior action, MEFP ¶20). Full
implementation of the elimination of VAT exemptions and zero-ratings identified through
the 2022 prior action will become effective on January 1, 2023 (structural benchmark).
• Reform of public employment and compensation. As planned, the authorities are

implementing a wage bill reform that unifies and makes fairer the compensation structure
across the public sector, facilitating the movement of civil servants across different
assignments and improving efficiency in the delivery of public services. Revising the wage
increase formula, and freezing wage supplements in nominal terms will contribute to
reducing the relatively high wage bill as a proportion of GDP over time, from 14.6 percent of
GDP in 2022 to 10.6 percent of GDP. The reforms are expected to have an upfront cost of
MT 9.6 billion (0.7 percent of GDP) in 2022, and a full year cost of MT 19.2 billion from 2023,
as civil servants are brought onto the new salary scale, with supplements paid to ensure no
individual is worse off under the new scheme. Changes to the rules mapping individual staff
from the old to the new pay scales were made to keep costs within the original envelope
(amendments modifying the wage bill reform law were passed by Parliament in October
2022). Further, only one in three leaving public employees will be replaced in 2023 and 2024,
except in health, education, agricultural extension, and administration of justice (structural
benchmarks for end-December 2022 and end-December 2023, respectively). As most civil
servants will be better off under the reform, base pay rises in 2023 have been set below
inflation. Risks from implementing this complex reform remain. Should costs again rise
above forecasts, the authorities will take compensating measures, and implement a
supplementary budget if necessary (MEFP ¶20). Next steps include a functional review of
public employment to be undertaken with World Bank support in 2023-24.
17. Increasing the efficiency and transparency of public resource management is a key
structural reform area.
• Revenue administration. The integrated electronic tax system is being extended to all taxes
and tax offices by end-2023 (structural benchmark). At the taxpayer level, the interface
allowing electronic filing and payment is expected to be fully implemented by June 2023
(structural benchmark). The authorities are modernizing the taxpayers’ registry and
monitoring of large taxpayers, and enhancing links and interoperability with other public
registries by end-2022 (MEFP ¶34). Risk assessment for mining and gas taxation will be
improved (MEFP ¶35), and capacity to gather and crosscheck third-party information
enhanced to increase compliance and tax arrears collection (MEFP ¶35). Long delays in the
VAT refunds process increase the effective VAT rate and create fiscal risks. The VAT reform

expected to be submitted to Parliament in November 2022 includes a twelve-month limit for

taxpayers to claim refunds, and ensures adequate resources are available for refunds (MEFP
¶20).
• Public financial management. Improvements in expenditure management, budgetary

planning, and financial programming are underway. Public procurement stages were added
to the electronic financial administration system (e-SISTAFE), and suppliers are now required
to show valid commitment notes before delivering goods and services (MEFP ¶38). Ensuring
more spending is executed within e-SISTAFE will improve control, avoid over-commitment at
the spending entity level, improve predictability and oversight, and reduce scope for extra-
budgetary arrears. The government plans to integrate all spending within e-SISTAFE by
end-2022 (MEFP ¶38) and establish limits on quarterly expenditure commitments (to be
operationalized through a quarterly Treasury Budget). This reform will be implemented
through the budget execution circular for the 2023 budget (proposed modified structural
benchmark for January 2023, MEFP ¶38). The authorities will establish a cash management
committee by end-2022 and map all public sector bank accounts (MEFP ¶39). The new
financial programming and budgetary planning tools will be operationalized in e-SISTAFE
and implemented in all spending units by end-December 2022 (structural benchmark, MEFP
¶38). The authorities will fully integrate climate resiliency criteria in public investment
planning and project selection over time (MEFP ¶40).
Text Table 4. Fiscal Structural Reforms, 2022

Revenue • Submission to Parliament of proposal limiting VAT refund claim period to 12 months is
Administration included in the VAT reform expected to be submitted to Parliament in November 2022.
• Approval of the reform of the internal structure of the revenue administration,
including fully integrating the risk management committee by end-2022.
• Updating the taxpayer registry and enhancing links and interoperability with other
public registries, especially for large taxpayers by end-2022.
Public Financial • Operationalization of new financial programming and forecasting tools and
Management implementation in all spending units expected by end-2022.
• Treasury mapping of all public sector bank accounts in the single treasury account
(expected end-June 2023).
• Full integration over time of climate resiliency criteria in public investment planning
and project selection criteria.
B. Reducing Debt Vulnerabilities
18. Changes to the macroeconomic outlook do not significantly affect the assessment of
debt sustainability. At program approval the risk of debt distress was assessed to be high and debt
to be sustainable in a forward-looking sense considering prospective revenues from the LNG
projects and the structure of related debt. Compared to program assumptions, staff expect a one-
year postponement of the resumption of the first onshore LNG project (TotalEnergies, Area 1,
Golfinho), with a minor downward effect on the national energy company’s (ENH) debt path.

Reflecting these delays, forecast GDP growth in 2026 is revised down by 8.8 percentage points
relative to the original program scenario, rising commensurately in 2027. Public debt to GDP for
2026-27 is over 10 percentage points higher, and the delayed investment and exports also alter
current account projections sharply in those years, postponing convergence of key liquidity and
solvency indicators to thresholds. The government has not contracted any new non-concessional
debt nor extended new debt guarantees. As planned, it expects to start repaying the reconciled
amount of its arrears with Brazil at the end of 2022, once the agreement is ratified by Brazil’s
parliament. The government is working to resolve pre-HIPC arrears with five countries.
19. Sovereign exposure on the debt related to the LNG projects remains unchanged. The
amount of the sovereign guarantee associated with this project stands at $43 million (0.2 percent of
GDP)—this could rise to a maximum $2.5 billion as project development proceeds. Repayment of
exploration and development debt related to the offshore platform (ENI, Area 4, Coral South) began
production in October. Under the financing terms of the project, 90 percent of the revenue
generated by the platform accruing to ENH will be used to repay creditors. ENH’s equity stake in the
Area 1 and 4 projects is funded by its partners: ENH is considering refinancing this debt considering
its high costs.
Text Table 5. Projected External Borrowing Program
20. The external borrowing May 9, 2022 to December 2023
plan for July-December 2022 is
unchanged compared with
PV of new debt 1/
PPG external debt (program purposes)
program approval. Loans under USD million Percent
negotiation are concessional and

By sources of debt financing 710 100
have NPVs well within the program Concessional debt, of which 2/ 710 100
cumulative target set for December Multilateral debt 370 52
Bilateral debt 340 48
2022. This includes a concessional Other 0 0
project loan from the World Bank of Non-concessional debt, of which 0 0
Semi-concessional 3/ 0 0
US$200 million to support Commercial terms 4/ 0 0
digitalization. For 2023, the
By Creditor Type 710 100
government has started negotiating Multilateral 370 52
a new concessional project loan of Bilateral - Paris Club 190 27
Bilateral - Non-Paris Club 150 21
US$200 million from the World Other 0 0
Bank—to support the
Uses of debt financing 710 100
implementation of the economic Infrastructure 710 100
reactivation package—and is also Sources: Mozambican authorities and IMF staff estimates.
1/ Contracting and guaranteeing of new debt. The present value of debt is calculated
seeking to finance critical using the terms of individual loans and applying the 5 percent program discount rate.
2/ Debt with a grant element that exceeds a minimum threshold. This minimum is
infrastructure projects. These projects typically 35 percent, but could be established at a higher level.
fall within program targets (Text

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
Table 5). be defined as the nominal/face value.
21. The Medium-Term Debt Strategy (MTDS), published in July, aims to increase the share
of concessional external financing, and lengthen maturities of domestic debt. Debt service
costs have increased, due especially to domestic debt. Given the significant exposure of commercial

banks to sovereign debt, the strategy aims to shift to longer maturities, and attract other types of
investors, including pension funds and insurance companies. An investor survey was launched to
determine the potential scale of demand. The strategy defines ambitious goals of gradually
increasing the share of external financing from 30 per-cent in 2022 to 55 per-cent in 2025 and
increasing the share of domestic debt with maturities over 5 years from 5 percent in 2022 to 25
percent in 2025. According to program targets and debt sustainability, the government plans to
seek external financing exclusively on concessional terms.
C. Monetary and Financial Sector
22. The BM has proactively tightened monetary policy to contain inflation expectations.
Despite subdued credit conditions, the monetary policy stance remains appropriate given high
inflation and risks that external price shocks
Text Figure 4. Inflation, MIMO and MPCC
have second round effects. The exchange rate
(In Percent)
against the US dollar has been de facto
stabilized, with historically low volatility since
July 2021 while it has appreciated against the
South African rand. The parallel exchange
market spread has remained below 5 percent
since March 2022, while market participants
report limited and brief queuing for FX
supply. Over the medium term, as public
sector deficits and debt decline and pressures
ease, reductions in the policy rate will become
more feasible. With continued reforms to
deepen interbank and FX markets, greater
exchange rate flexibility would provide a
buffer against external shocks. Sources: Authorities’ data and IMF Staff calculations
23. International reserves have declined during 2022. The BM meets the currency demand
for fuel imports not served by the interbank market, leading to a faster-than-anticipated decline in
reserves as international prices have risen. Gross international reserves fell to US$2.6 billion at end-
September (or 3.4 months of projected 2023 non-megaprojects imports) down from US$3.5 billion
at end-December 2021. Despite the downward revision in the forecast, program targets for net
international reserves are unchanged, reflecting the authorities’ intention to retain sufficient buffers
to manage possible new shocks, and given the expected impact of tighter monetary policy.
24. Banks report strong system-wide capital and liquidity ratios, with some heterogeneity
across institutions. At end-August 2022, system-average capital adequacy ratios were 26.1 percent,
comfortably above the regulatory minimum of 12 percent. NPLs were at 9.1 percent, below the end-
June 2022 figure of 10 percent. NPLs differ across banks, partly owing to differential exposures to
SOEs impacted by the pandemic. The authorities continue to strengthen supervision, for which
development partners provide CD. Credit extension is mostly to larger enterprises and formal sector

wage earners. However, a new collateral registry (movable property) launched in July 2021 should
help expand lending to SMEs over the medium term.
25. Financial inclusion is gradually increasing. Bank account ownership rose to 31.2 percent in
June 2022, compared with 30.7 percent in June 2021. 4 Parliament approved a Basic Bank Account
law that allows all banks to create accounts with fewer formal documentation requirements
(addressing a constraint for low-income groups) and reduces the legal age to open a bank account
from 21 to 18 years. The BM is reforming the payment system law (MEFP ¶47) and has reached
agreement on interoperability with mobile payments providers to facilitate use of digital money,
e-commerce and digitalization of government benefits. An evaluation of the 2016-2022 National
Financial Inclusion Strategy, expected by end-June 2023, will inform the successor strategy.
D. Structural Reforms
26. Preparation of the Sovereign Wealth Fund (SWF) law to manage the resources
expected from the LNG projects is well advanced (structural benchmark, Dec 2022, MEFP ¶29).
The draft law envisages dividing resource flows between the SWF and the budget. The BM will
manage resources transferred to the SWF, following transparency and accountability rules broadly
aligned with the Santiago Principles. Next steps include developing regulations which will integrate
the SWF law with Treasury management and the medium-term fiscal framework, to manage residual
volatility in fiscal revenues that could have destabilizing macroeconomic side-effects. Prospects for
scaling up public investment in the medium term to meet development goals underscore the
importance of improving public investment management, including with World Bank support.
27. The climate policy agenda is being articulated. The Council of Ministers has approved a
plan to address financial risks from natural disasters, and the World Bank is completing a Country
Climate and Development Report (CCDR, expected to be finalized by end-2022). The focus is on
adaptation measures, including strengthening climate resilience criteria in the selection of public
investment projects (included in PFM reforms under the program).
28. Progress continues across the governance agenda, to minimize vulnerabilities to

corruption.
• AML/CFT. The authorities are implementing their comprehensive action plan to address the
gaps identified in the June 2021 report of the Eastern and Southern Africa Anti-Money
Laundering Group (MEFP ¶46), and in the updated action plan adopted by the Financial
Action Task Force (FATF) Plenary in October 2022, following 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 the FATF standards, and
targeted financial sanctions for terrorism financing. The risk-based supervision framework is
being supported by Bank of France CD.
4
Bank of Mozambique, Financial Inclusion report 2021

• Public probity law. The law is 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. With finalization of the draft taking
longer than expected submission to parliament is expected by end-June 2023 (revised from
December 2022, structural benchmark).
• COVID audit follow-up. An audit of COVID related spending was completed in May 2022.
The authorities are implementing an action plan built on the audit recommendations
through the Ministry of Finance general inspectorate. A PFM strategy to strengthen budget
execution in emergencies is expected by end-June 2023 (MEFP ¶37).
PROGRAM MODALITIES AND OTHER ISSUES

29. Performance criteria and indicative targets are proposed for June, September and
December 2023, the MPCC bands are proposed to be raised for the remainder of the program,
and the IT on the floor of domestic debt is proposed to be raised for end-June 2023. A floor on
the domestic primary surplus is proposed to be set at MT 5.3 billion for end-June 2023, MT 2.0 bil-
lion for end-September 2023 (IT), and MT 7.5 billion for end-December 2023. The end-December
2022 MPCC is proposed to be set with the midpoint based on projected inflation (15.0 percent) and
a symmetric band of ±3 percent around the objective, followed by a narrower symmetric band of
±2 percent around 14.0 percent at end-March 2023, 11.5 percent at end-June 2023, 10.5 percent at
end-September 2023, 9 percent at end-December 2023, 8.5 percent for end-March 2024, 7.5 per-
cent for end-June or end-September 2024, 6.5 percent for end-December 2024, and 6 percent for
end-March 2025. The monetary policy tightening since early 2021 is considered adequate to contain
inflation and guide it towards the BM’s medium-term objective. Staff proposes a change to the
indicative target on the ceiling for the domestic debt stock of MT 320 billion at end-Jun 2023, raised
by MT 34 billion relative to the initial IT, to reflect delays in disbursements from a development
partner and higher than anticipated issuance given somewhat easier debt market conditions in the
first half of 2022. IT ceilings of MT 328 billion at end-Sep 2023 and MT 350 billion at end-Dec 2023
are proposed. An adjustor is proposed to the IT ceiling of domestic debt (TMU ¶26) to reflect the
planned securitization to clear the current stock of VAT refund arrears, amounting to MT 35.2 billion
at end-June 2022 (MEFP ¶36).
30. A minor modification to the structural benchmark on implementation of quarterly

commitment ceilings and the delay of the structural benchmark on the Public Probity Law are
proposed. The SB set by the Board at the time of program approval requires that the quarterly
commitment ceilings be implemented in the budget execution decree. A change is proposed to
make the instrument the budget execution circular issued in January 2023, as the circular triggers
practical implementation of the measure. While the reform will proceed as planned from the
beginning of 2023, the change in date implies that the SB can only be formally assessed at the time
of the third and not the second review. A change in the date for the structural benchmark on
submission to parliament of the public probity law is proposed, from end-December 2022 to end-
June 2023, reflecting delays in finalization of the draft amendments.

31. The program is fully financed, with firm commitments for the next twelve months and
good prospects for adequate financing for the remainder of the program period. The disburse-
ment will be used for budget support. Budget support will also be provided by the World Bank
(commitments of US$550 million over 2022-2024) and the European Union (US$50 million).
Text Table 6. Public Gross Financing Needs and Sources of Financing, 2022-
25
(Millions of US dollars)
2022 2023 2024 2025
Gross financing needs 1,505 2,068 2,072 2,108
Domestic primary deficit
142 556 454 278
(exc. deficit reduction measures)1
Debt service 1,359 1,512 1,618 1,830

Interest payments 623 633 719 707
MLT amortization 736 878 900 1,123
Deficit reducing measures 185 703 798 920

VAT reform 0 118 126 133
Wage bill management 185 586 672 788
Sources of financing 1,320 1,364 1,275 1,188

Budget grants 350 150 100 0
World Bank 300 150 100 0
European Union 50 0 0 0
Domestic MLT borrowing 506 1,043 1,496 1,223
o.w. SDR allocation 210 93 0 0
Domestic ST borrowing (net) 335 -86 -429 -86
Drawdown of deposits 107 135 -16 -11
IMF 155 123 124 62
(in percent of quota) 51% 41% 41% 20%
Net Float -132 0 0 0
Memorandum
2
Domestic primary balance (baseline) 42.7 147.5 343.4 718.1
Net issuance of domestic debt 577 586 682 528
Sources: Authorities and IMF staff estimates and projections.

1/ Primary balance measured from above the line and excluding external grants and loans
for investment, special programs and lending to public enterprises.
2/ Negative sign means surplus.
32. 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 23.7 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.

33. The BM has made progress in implementing the 2020 safeguards assessment
recommendations. The BM strengthened internal audit and compliance procedures, published the
overdue audited financial statements for 2021, and committed to timely publications going forward
(MEFP ¶27). In addition, the BM is reviewing internal controls in currency operations with the
ongoing TA under a twinning arrangement with Norges Bank. The recommended legal amendments
to strengthen the BM’s mandate, autonomy and governance arrangements are planned to be
submitted to parliament by June 2024 (MEFP ¶25).
34. CD is aligned with program objectives, and data provision is broadly adequate for
program monitoring. CD prioritizes PFM reforms, fiscal policy, revenue administration, natural
resource management, governance and fiscal transparency, monetary policy implementation, and
government, real, and financial sector statistics. Mozambique is a high intensity user of Fund TA with
a solid implementation record.
STAFF APPRAISAL
35. The economic recovery is strengthening, and the authorities are proactively
addressing the inflationary shock caused by exogenous factors. Supported by a successful
vaccination campaign, growth in real GDP in the first half of 2022 was moderately stronger than
expected, with a recovery of services, industry, and agriculture. Rising inflation, driven by the global
surge in fuel and food prices and domestic floods, is being addressed through increased monetary
policy interest rates to contain inflation expectations and second round effects. The widening of the
current account deficit is due to imports related to LNG projects. Risks to the outlook are significant,
but relatively balanced by good prospects for growth and natural gas exports.
36. Performance under the program has been strong. All quantitative program targets and
the structural benchmark were met at end-June, while the MPCC inflation band was breached. PCs
on the domestic primary balance, net international reserves and debt variables, and ITs on social
spending and the stock of domestic debt were met. Inflation overshot the upper bound of the
MPCC due to exogenous factors. The monetary policy tightening since early 2021 is estimated to be
sufficient to effectively contain inflation and guide it towards the BM’s medium-term objective.
Despite pressures, solid revenue performance and restraint in spending given tight financing
conditions underpinned fiscal outcomes in line with the program.
37. The authorities are implementing fiscal policy reforms that will contribute to the
medium-term consolidation of the fiscal position. A broadening of the VAT base will help secure
a buoyant and diversified, non-LNG, source of revenue. Implementing the reform of public sector
remuneration will improve efficiency in the delivery of public services, foster a rebalancing of public
outlays towards more growth-enhancing spending, and align the wage bill with regional peer
countries over time. The authorities’ commitment to restrain wage rises in the near-term and keep
reform costs within the original envelope will help underpin fiscal consolidation.

38. Revenue administration and public financial management reform will help achieve
fiscal policy objectives. Digitizing revenue administration, linkages with other public registries, and
the tax interface with the public is expected to strengthen revenue collection. Budget execution
reforms to incorporate all stages of the expenditure chain within the electronic financial
management system will improve budget discipline and reduce scope for supplier arrears.
Strengthening SOE management and oversight will help prevent expenditure overruns, increase
transparency, and reduce a key fiscal risk.
39. The current stance of monetary policy is appropriate to prevent an upward drift in
core inflation. Staff support the BM’s proactive approach, including additional tightening if needed,
to help ensure inflation objectives and the external position envisaged at the time of the program
approval remain within reach. The faster-than-anticipated decline in international reserves highlights
the need for caution; the authorities stand ready to take additional policy steps, if needed, to
maintain a prudent level of reserves and adhere to program targets. Over the medium term, as
structural reforms progress to deepen the financial, money and foreign exchange markets and the
fiscal position is further consolidated, additional exchange rate flexibility would strengthen
Mozambique’s resilience to shocks.
40. The authorities’ reforms strengthen institutions over the medium-term. The draft SWF
law represents an important step in the development of a transparent, accountable, and efficient
institutional framework for the management of LNG receipts. Regulations implementing the SWF
law and strengthening public investment rules and practice are the next steps needed to articulate
the fiscal framework and mitigate residual volatility in budget revenues. Further improvement of
PFM processes and integrating natural resource revenues into the medium-term fiscal framework
are important to strengthen transparency and efficiency of public spending around widely shared
objectives. Recent steps towards implementing the authorities AML/CFT action plan and the
updated action plan adopted by the FATF Plenary are important steps in meeting the authorities’
governance reform objectives and addressing Mozambique’s grey listing. Amendment of the public
probity law and implementation of recommendations from the audit of COVID spending are
priorities in the months ahead.
41. Staff supports the completion of the first review under the ECF arrangement, the
requests for modification of the MPCC from end-September 2022 to end-June 2023, the SBs on the
submission of the public probity law and the quarterly commitment limits for end-December 2022
and the IT for end-June 2023, and completion of the financing assurances review.

Figure 1. Mozambique: Growth and Living Standards
The pandemic slowed the upward trend in living conditions, which

A series of shocks has lowered growth in GDP since 2015.
remain below SSA comparators.
Life expectancy improved through 2020… … and gender disparities have declined.
While poverty has been reduced, the decline has stalled in

…and inequalities were acute as of 2014.
recent years…
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 small overall impact… …and vaccination rates are high.
The recovery broadened and picked up pace through the first While the PMI suggest a modest deceleration following
half of the year. Russia’s invasion of Ukraine.
Inflation has picked up… …driven by food and fuel prices.
Sources: OurWorldInData, National Institute of Statistics, Standard Bank/IHS Markit, and IMF Staff Calculations.

Figure 3. Mozambique: Monetary and Financial Developments
…maintaining the contemporaneous real policy rate as the highest

The policy rate was increased in March and September 2022…
in the Southern African Development Community (SADC).
Policy Rate Minus Inflation Rate in SADC

Countries, September 2022
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
-12.0
-14.0
Sources: Thomson Reuters Eikon, country authorities.
The exchange rate has been stable against the US dollar since Liquidity is managed through open market operations, with larger
July 2021. volumes around the time of policy rate increases.
Credit growth is relatively subdued, with some recovery in July Reported overall NPLs and provisioning rates remained relatively
2022. steady, while COVID forbearance measures have been lifted.
Sources: IMF staff calculations, Bank of Mozambique.

Figure 4. Mozambique: Selected External Sector Developments
In the post-COVID recovery, the non-megaprojects current …while tighter monetary policy has limited exchange rate
account deficit has widened in 2021… fluctuations.
Current Account Balance Effective Exchange Rates

(In Percent of GDP) (Index)
10 115
0 105
-10 95
-20 85
-30 75
65
-40 Total
55 Nominal Real
-50 Excl. Megaprojects
Excl. Megaprojects and MP-related firms 45

-60
International reserves have declined following the drop in

…and to cover growing fuel import bills.
reserve requirement ratio…
Gross International Reserves FX Interventions and Spot Exchange Rate

5 8 (in Million US dollars)
200 80
4 7
150 70
6 100 60
3
5 50 50
2 0 40
4 FX sale, other
-50 30
1 3
FX sale for fuel imports
-100 FX Purchase 20
0 2 -150 MZN/USD (rhs) 10
-200 0
Jan-19
Apr-19
Jan-20
Apr-20
Jan-21
Apr-21
Jan-22
Apr-22
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Jul-22
Billion USD
Months of Imports (rhs)
Months of Imports (excl. MP, rhs)
The financial account was dominated by FDI flows and a External debt was lower mostly due to the appreciation of the
private firm loan reimbursement. Metical over 2021.
Financial Account Balance External Debt

(Percent of GDP) (Percent of GDP)
30 200
20
180 Public Sector Debt
10
160 MP-related Private Sector Debt
0
140
-10 Other Private Sector Debt
120
-20
-30 100
-40 80
Reserve Assets
-50 Other Investment 60
-60 Direct Investment 40
-70 Portfolio Investment & Derivatives 20
Financial Account Balance
-80 0
Sources: Mozambican authorities and IMF staff estimates.

Figure 5. Mozambique: Fiscal Developments
Revenues remain high and stable despite various shocks… …while spending has been controlled despite pressures.
Revenue Collection Total Expenditure and Net Lending

(In Percent of GDP) (In Percent of GDP)
35 40
35 Proj.
30
30
25
25
20 20
15 15
10 10
5
5
0
0 2018 2019 2020 2021 2022 2023 2024 2025
2018 2019 2020 2021 2022 2023 2024 2025
Net lending Capital expenditure
Windfall capital gains tax Other revenue
Taxes on income and profits Domestic tax on goods and services
Current expenditure
The fiscal deficit has been improving over the past few Domestic issuance was the main source of financing before the
years. program.
Deficit and Budget Support Budget Financing

(In Percent of GDP) (In Percent of GDP)
8 8
6 Proj. Proj.
6
4
2 4
0
-2 2
-4 0
-6
-8 -2
2018 2019 2020 2021 2022 2023 2024 2025 -4
Domestic primary balance 1/ 2018 2019 2020 2021 2022 2023 2024 2025
Overall balance, after grants
Budget support loans Budget support grants
1/ Revenue less grants, minus domestically financed primary
Net domestic financing
Debt ratios are stabilizing as the economy recovers… …despite rising borrowing costs from domestic debt.
Total Public Debt Composition Government Borrowing

(In Percent of GDP) 200 25
160
Proj. 20
140
150
Percent per Annum
120
Billion meticais
15
100 100
80 10
60 50
5
40
20 0 0
0
2018 2019 2020 2021 2022 2023 2024 2025 CB Advances in Local Currency
Government Securities Holdings by Other Depository Corporations
Public External Debt Public Domestic Debt
T-Bills Rate, 91-day average (rhs)
Sources: Mozambican authorities and IMF staff estimates and projections.

Table 1. Mozambique: Selected Economic and Financial Indicators, 2019–27 1/

2019 2020 2021 2022 2023 2024 2025 2026 2027
Est. Est. Prel. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj.
National income and prices (Percentage change, unless otherwise indicated)

Real GDP 2.3 -1.2 2.3 3.8 3.8 5.0 5.0 8.3 8.3 5.1 5.1 13.8 5.0 13.1 15.6
Real GDP, excl. extractive industiries 2.7 -0.1 2.3 3.4 3.4 3.8 3.7 4.0 4.1 4.0 4.0 4.0 4.0 4.0 4.0
Nominal GDP 7.5 2.2 5.0 11.3 10.6 12.3 13.2 15.6 16.7 11.7 11.8 20.5 11.3 19.3 22.0
GDP deflator 5.1 3.4 2.6 7.2 6.5 7.0 7.8 6.7 7.8 6.3 6.4 5.9 6.0 5.5 5.5
Consumer prices (end of period) 3.5 3.5 6.7 9.0 15.0 7.0 8.5 6.3 6.1 5.5 5.5 5.5 5.5 5.5 5.5
Consumer prices (annual average) 2.8 3.1 5.7 8.5 10.7 7.7 11.5 6.5 7.3 5.9 5.7 5.5 5.5 5.5 5.5
GDP (billions of meticais) 963 983 1,033 1,173 1,142 1,318 1,292 1,523 1,509 1,701 1,687 2,050 1,878 2,446 2,291
GDP (billions of US dollars) 15.4 14.2 15.8 18.1 17.9 19.5 19.7 21.5 21.9 23.0 23.3 26.6 24.9 30.6 29.3
GDP per capita (US dollars) 508 454 492 547 541 573 582 614 629 638 651 718 676 804 774
Investment and savings (Percent of GDP)

Gross domestic investment 60.1 50.8 49.8 79.9 67.8 72.3 37.8 73.5 61.5 74.0 66.3 62.3 68.1 48.5 59.7
Gross domestic savings, excl. grants 41.0 23.5 26.2 35.0 26.3 33.3 23.2 35.9 26.0 37.0 27.4 36.9 27.2 39.5 32.5
Central government (Percent of GDP)

Total revenue 1/ 29.0 23.9 25.7 25.0 25.7 25.4 25.9 25.1 25.7 25.6 26.3 24.8 27.5 24.1 25.6
of which: LNG revenues N.A. N.A. N.A. N.A. N.A. 0.1 0.1 0.3 0.3 0.3 0.3 0.9 1.0 1.2 1.3
Total expenditure and net lending 29.8 32.9 31.5 32.4 33.2 31.8 33.3 29.1 30.7 27.8 29.9 24.9 29.8 22.4 26.6
of which: current expenditure 22.0 23.3 24.0 24.7 26.1 24.2 24.8 23.3 24.1 22.2 23.1 19.7 22.3 17.9 19.9
Overall fiscal balance, before grants -0.7 -9.0 -6.7 -8.0 -8.2 -6.4 -7.4 -4.0 -5.0 -2.2 -3.6 -0.1 -2.3 1.7 -1.0
Grants 1.0 3.6 2.0 4.4 4.4 2.8 3.5 1.2 1.7 0.6 1.4 0.5 1.5 0.4 1.6
Overall fiscal balance, after grants 0.3 -5.4 -4.8 -3.6 -3.7 -3.6 -3.9 -2.8 -3.3 -1.6 -2.2 0.4 -0.7 2.1 0.5
Overall fiscal balance before LNG revenues, after grants 0.3 -5.4 -4.8 -3.6 -3.7 -3.7 -4.0 -3.1 -3.6 -1.9 -2.6 -0.5 -1.7 0.8 -0.7
Primary fiscal balance, after grants 3.5 -2.3 -2.1 -0.2 -0.2 -0.6 -0.7 0.3 0.0 1.3 0.8 2.9 2.3 4.1 3.1
Public sector debt (Percent of GDP) 2/
Nominal stock of total debt 99.0 120.0 107.0 101.4 102.9 102.1 101.4 99.2 102.6 96.7 101.5 83.2 97.6 69.8 81.9
of which: external 79.4 97.8 82.8 77.6 77.6 78.5 75.9 76.2 77.7 74.4 76.9 64.7 74.4 55.7 62.8
Money and credit (Percentage change, unless otherwise indicated)

Reserve money 19.1 9.0 -14.4 10.7 -5.1 11.7 11.2 13.8 14.0 11.7 11.5 13.4 15.2 14.5 11.2
Broad Money (M3) 12.1 23.6 2.8 12.0 2.3 12.2 11.8 12.8 12.6 11.2 11.3 14.1 13.3 13.3 11.6
Percent of GDP 48.6 58.9 57.6 56.8 53.3 56.7 52.7 55.4 50.8 55.1 50.6 52.2 51.5 49.5 47.1
Credit to the economy 5.0 14.8 3.0 8.7 3.0 11.8 11.5 14.8 12.0 12.7 10.0 15.2 10.0 13.3 12.0
Percent of GDP 24.0 27.0 26.5 25.3 24.6 25.2 24.3 25.0 23.3 25.3 22.9 24.1 22.7 22.9 20.8
Policy rate (percent) 3/ 12.75 10.25 13.25 15.25 17.25 … … … … … … … … … …
External sector (Percent of GDP, unless otherwise indicated)

Current account balance -19.1 -27.3 -23.6 -44.9 -41.5 -39.0 -14.7 -37.6 -35.5 -37.0 -38.9 -25.4 -40.9 -9.0 -27.1
excl. megaprojects -24.9 -28.0 -34.7 -31.4 -33.9 -28.7 -31.7 -26.0 -29.3 -25.5 -28.0 -24.8 -27.5 -23.4 -26.1
excl. megaprojects (MP) and indirect MP imports -16.9 -18.0 -22.3 -19.6 -16.2 -17.0 -19.3 -14.6 -17.0 -14.1 -16.5 -14.1 -16.4 -13.3 -16.2
Merchandise exports 30.3 25.3 35.4 37.0 43.4 36.2 38.3 38.1 39.3 37.5 38.8 41.0 37.2 44.6 40.6
excl. megaprojects 9.0 7.7 9.8 9.9 9.9 10.1 9.8 9.5 9.2 9.3 9.0 8.6 9.0 8.1 8.4
Merchandise imports 43.9 41.6 49.7 71.8 74.6 49.1 43.5 46.6 46.2 45.3 45.5 39.9 44.6 34.6 38.4
excl. megaprojects 34.8 36.1 44.6 42.0 43.5 37.6 39.1 34.6 36.0 33.5 34.2 31.0 33.5 28.8 30.1
Net foreign direct investment 22.2 21.4 32.3 14.0 17.1 11.4 7.6 10.7 13.2 10.9 13.3 2.2 12.4 4.6 4.1
Terms of trade (Percentage change) -2.0 -0.3 1.1 0.1 -3.4 2.3 -0.4 -0.4 1.4 -0.7 1.5 -0.8 1.0 -0.4 0.7
Gross international reserves (millions of US dollars, end of period) 3,884 4,070 3,470 3,076 2,905 3,263 3,031 3,613 3,389 4,099 3,686 4,700 4,447 5,710 4,834
Months of next year's non-megaproject imports 7.5 5.8 4.5 4.2 3.7 4.4 3.8 4.7 4.2 5.0 4.3 5.3 4.9 6.1 5.0
Net international reserves (millions of US dollars, end of period) 3,605 3,493 2,927 2,400 2,234 2,485 2,265 2,717 2,512 3,196 2,801 3,886 3,647 4,998 4,128
Exchange rate
Meticais per US dollar, end of period 61.5 74.9 63.8 ... ... ... ... ... ... ... ... ... ... ... ...
Meticais per US dollar, period average 62.5 69.5 65.5 ... ... ... ... ... ... ... ... ... ... ... ...
Real effective exchange rate (Percentage change) 1.5 -5.3 2.9 ... 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 September 2022).

Table 2a. Mozambique: Government Finances, 2019–27

(Billions of Meticais)
2019 2020 2021 2022 2023 2024 2025 2026 2027
Est. Est. Est. Prelim. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj.
Total revenue ¹ 278.9 235.3 266.8 265.9 293.8 293.6 334.9 334.3 381.9 387.6 434.9 444.1 509.0 516.0 589.3 585.3
Tax revenue 242.2 196.7 222.9 221.7 242.0 248.7 278.3 283.0 319.3 330.3 365.6 380.6 431.8 446.1 503.6 508.3
Income and profits 144.3 99.4 109.1 99.9 123.2 122.5 133.0 130.0 155.4 153.4 180.4 181.5 203.9 205.7 228.8 228.7
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 0.0 0.0 0.0
Goods and services ¹ 74.0 72.1 83.0 91.4 86.2 94.0 108.7 115.8 118.0 130.1 131.1 144.5 152.5 165.8 180.5 187.4
International trade 17.1 15.1 18.0 18.0 18.4 18.5 19.4 19.7 21.4 22.0 24.6 24.9 29.4 29.0 34.0 33.2
Other 6.8 10.1 12.8 12.5 14.3 13.8 17.2 17.4 24.5 24.7 29.5 29.8 46.0 45.5 60.2 59.0
Of which: Revenue from LNG … … … … … … 1.3 1.3 5.0 4.7 5.9 5.6 18.8 18.0 30.0 28.7
Nontax revenue 36.8 38.6 43.9 44.2 51.8 44.9 56.5 51.3 62.6 57.4 69.3 63.5 77.1 70.0 85.8 77.0
Total expenditure and net lending 287.2 323.3 323.0 325.6 380.4 379.3 419.6 429.9 442.7 463.1 472.8 504.9 511.4 558.8 548.6 609.2
Current expenditure 212.0 229.6 245.8 248.1 289.8 298.4 318.7 320.4 354.1 363.9 377.2 389.6 403.7 418.1 437.8 456.3
Compensation to employees 117.3 130.1 145.0 145.1 166.6 166.6 186.7 181.8 199.8 203.7 210.8 216.7 221.0 226.8 235.9 242.0
Of which: Social insurance 4.5 5.7 5.8 5.9 6.1 6.1 6.6 6.1 7.2 6.8 7.6 7.3 8.1 7.7 8.5 8.2
Goods and services 41.2 41.0 43.5 44.8 49.7 49.7 55.3 58.3 62.5 65.5 69.2 73.2 78.0 81.7 93.7 97.0
Interest on public debt 31.2 30.7 27.4 28.1 40.4 39.9 40.0 41.5 47.2 49.4 48.3 51.2 51.0 56.3 49.3 58.8
Domestic 17.3 15.8 16.1 17.6 29.0 29.0 28.2 29.9 35.2 38.1 36.2 39.6 36.1 41.8 34.5 44.4
External 13.9 14.9 11.3 10.5 11.4 10.9 11.8 11.6 12.0 11.3 12.1 11.6 14.9 14.5 14.8 14.4
Subsidies and transfers 22.3 27.7 29.9 30.1 33.1 42.1 36.8 38.8 44.7 45.2 48.9 48.6 53.7 53.2 59.0 58.5
Capital expenditure 68.8 86.9 73.7 73.9 85.9 76.3 96.3 105.0 83.8 94.4 90.6 110.2 102.4 135.5 105.5 147.7
Domestically financed 33.5 44.1 33.9 34.7 32.4 31.4 39.9 43.9 44.4 47.6 49.2 57.0 60.9 76.0 70.1 86.0
Externally financed 35.3 42.9 39.7 39.2 53.5 44.9 56.4 61.0 39.4 46.9 41.4 53.2 41.5 59.5 35.3 61.7
Grants 9.3 20.1 16.7 18.7 28.8 20.1 30.1 35.3 11.2 19.2 10.9 23.2 10.6 29.0 9.5 36.1
Investment projects 5.1 15.6 9.9 11.78 19.6 11.1 22.4 26.9 5.0 10.7 4.9 12.9 4.7 16.1 4.2 20.1
Special programs 4.3 4.5 6.9 6.9 6.6 6.5 6.4 7.0 6.2 8.5 6.0 10.3 5.9 12.9 5.2 16.0
Direct financing 0.0 0.0 0.0 0.0 2.6 2.6 1.4 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Loans 25.9 22.8 23.0 20.5 24.8 24.8 26.2 25.8 28.2 27.7 30.4 30.0 30.9 30.5 25.9 25.6
Net lending ² 6.4 6.8 3.4 3.6 4.7 4.7 4.6 4.5 4.8 4.8 5.1 5.0 5.3 5.2 5.3 5.2
Statistical Discrepancy 1.4 -0.1 -13.9 -10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unallocated revenue (+)/ expenditure (-) 0.0 0.0 0.0 0.0 -7.7 -7.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Overall balance, before grants -6.8 -88.1 -70.1 -69.7 -94.3 -93.4 -84.7 -95.6 -60.9 -75.5 -37.9 -60.7 -2.4 -42.7 40.8 -23.9
Grants received 9.3 35.1 18.5 20.4 51.6 50.7 36.9 45.1 18.3 26.0 10.9 23.2 10.6 29.0 9.5 36.1
Project support 9.3 20.1 16.7 18.7 28.8 28.4 30.1 35.3 11.2 19.2 10.9 23.2 10.6 29.0 9.5 36.1
Budget support 0.0 15.1 1.7 1.7 22.8 22.4 6.8 9.8 7.1 6.9 0.0 0.0 0.0 0.0 0.0 0.0
Primary balance, after grants 33.6 -22.4 -24.2 -21.2 -2.3 -2.7 -7.9 -9.1 4.6 0.0 21.3 13.6 59.3 42.6 99.5 71.0
Overall balance, after grants 2.5 -53.0 -51.6 -49.3 -42.7 -42.6 -47.9 -50.5 -42.6 -49.4 -27.0 -37.6 8.2 -13.7 50.2 12.2
Financing -2.5 53.0 51.6 49.3 42.6 42.61 47.9 50.5 42.6 49.4 27.0 37.6 -8.2 13.7 -50.2 -12.2
Net external financing 16.9 23.4 8.8 6.5 8.4 7.3 2.4 3.3 2.3 3.6 -2.0 0.2 -8.0 -5.4 -13.3 -11.2
Disbursements 38.7 48.2 25.6 23.3 37.9 37.5 37.8 36.6 40.2 39.0 38.1 37.3 33.7 33.3 28.5 28.1
Project 25.9 22.8 23.0 20.5 24.8 24.8 26.2 25.8 28.2 27.7 30.4 30.0 30.9 30.5 25.9 25.6
Nonproject support 12.8 25.4 2.6 2.7 13.2 12.7 11.5 10.8 12.0 11.3 7.7 7.3 2.8 2.8 2.6 2.5
Of which budget support (including IMF) 7.4 20.7 0.0 0.0 10.3 9.9 8.7 8.1 9.2 8.5 4.8 4.5 0.0 0.0 0.0 0.0
Amortization -21.8 -24.8 -16.8 -16.8 -29.6 -30.2 -35.4 -33.3 -37.9 -35.4 -40.1 -37.2 -41.7 -38.7 -41.7 -39.3
Net domestic financing -26.8 18.6 38.4 38.4 42.7 43.7 45.5 47.2 40.2 45.8 28.9 37.4 -0.2 19.2 -37.0 -1.0
Of which: short term debt (net) 8.7 14.5 13.7 13.7 9.0 21.4 -8.2 -5.6 -19.7 -29.5 -9.7 -6.2 -6.5 0.7 -10.7 -7.6
Of which: issuances of medium term debt 23.5 52.1 40.4 40.4 42.2 32.4 58.7 68.3 91.0 102.9 68.3 88.4 53.1 90.1 28.0 72.3
o.w. SDR allocation 20.5 13.4 6.1
Of which: amortization of medium term debt -27.3 -29.3 -26.0 -26.0 -15.2 -16.9 -18.9 -24.3 -31.0 -26.5 -30.2 -44.0 -46.2 -68.9 -53.2 -64.1
Change in Deposits -31.6 -18.8 10.5 10.5 6.7 6.8 13.9 8.8 -0.1 -1.1 0.6 -0.8 -0.5 -2.7 -1.0 -1.6
Float from previous year³ -2.5 -4.4 -9.5 -9.5 -8.4 -8.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Float at the end of the year³ 4.4 9.5 8.4 8.4 0.0 0.0 0.0 0.0 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 5.4 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 0.0
Memorandum items:
Primary balance after grants (excl. the one-off 2019
capital gains tax revenues) -20.5 -22.4 -24.2 -21.2 -2.3 -2.7 -7.9 -9.1 4.6 0.0 21.3 13.6 59.3 42.6 99.5 71.0
Domestic primary balance⁵ 64.6 -8.5 13.392 10.2 2.7 2.7 14.3 9.7 28.1 23.6 53.8 46.4 92.0 75.8 126.9 99.1
Stock of Government Deposits 116.7 135.5 125.0 125.0 118.3 118.2 104.4 109.3 104.5 110.4 103.9 111.2 104.4 113.9 105.4 115.5

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, 2019–27

(Percent of GDP)
2019 2020 2021 2022 2023 2024 2025 2026 2027
Est. Est. Est. Prelim. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj.
Total revenue ¹ 29.0 23.9 25.8 25.7 25.0 25.7 25.4 25.9 25.1 25.7 25.6 26.3 24.8 27.5 24.1 25.6
Tax revenue 25.2 20.0 21.6 21.5 20.6 21.8 21.1 21.9 21.0 21.9 21.5 22.6 21.1 23.8 20.6 22.2
Taxes on income and profits 15.0 10.1 10.6 9.7 10.5 10.7 10.1 10.1 10.2 10.2 10.6 10.8 9.9 11.0 9.4 10.0
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 0.0
1
Taxes on goods and services 7.7 7.3 8.0 8.8 7.3 8.2 8.3 9.0 7.7 8.6 7.7 8.6 7.4 8.8 7.4 8.2
Taxes on international trade 1.8 1.5 1.7 1.7 1.6 1.6 1.5 1.5 1.4 1.5 1.4 1.5 1.4 1.5 1.4 1.4
Other taxes 0.7 1.0 1.2 1.2 1.2 1.2 1.3 1.3 1.6 1.6 1.7 1.8 2.2 2.4 2.5 2.6
Of which : Revenue from LNG … … … … … … 0.1 0.1 0.3 0.3 0.3 0.3 0.9 1.0 1.2 1.3
Nontax revenue 3.8 3.9 4.3 4.3 4.4 3.9 4.3 4.0 4.1 3.8 4.1 3.8 3.8 3.7 3.5 3.4
Total expenditure and net lending 29.8 32.9 31.3 31.5 32.4 33.2 31.8 33.3 29.1 30.7 27.8 29.9 24.9 29.8 22.4 26.6
Current expenditure 22.0 23.3 23.8 24.0 24.7 26.1 24.2 24.8 23.3 24.1 22.2 23.1 19.7 22.3 17.9 19.9
Compensation to employees 12.2 13.2 14.0 14.1 14.2 14.6 14.2 14.1 13.1 13.5 12.4 12.8 10.8 12.1 9.6 10.6
Of which : Social insurance 0.5 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.3 0.4
Goods and services 4.3 4.2 4.2 4.3 4.2 4.4 4.2 4.5 4.1 4.3 4.1 4.3 3.8 4.4 3.8 4.2
Interest on public debt 3.2 3.1 2.7 2.7 3.4 3.5 3.0 3.2 3.1 3.3 2.8 3.0 2.5 3.0 2.0 2.6
Domestic 1.8 1.6 1.6 1.7 2.5 2.5 2.1 2.3 2.3 2.5 2.1 2.3 1.8 2.2 1.4 1.9
External 1.4 1.5 1.1 1.0 1.0 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.7 0.8 0.6 0.6
Subsidies and transfers 2.3 2.8 2.9 2.9 2.8 3.7 2.8 3.0 2.9 3.0 2.9 2.9 2.6 2.8 2.4 2.6
Capital expenditure 7.1 8.8 7.1 7.2 7.3 6.7 7.3 8.1 5.5 6.3 5.3 6.5 5.0 7.2 4.3 6.4
Domestically financed 3.5 4.5 3.3 3.4 2.8 2.7 3.0 3.4 2.9 3.2 2.9 3.4 3.0 4.0 2.9 3.8
Externally financed 3.7 4.4 3.8 3.8 4.6 3.9 4.3 4.7 2.6 3.1 2.4 3.2 2.0 3.2 1.4 2.7
Net lending 2 0.7 0.7 0.3 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2
Statistical Discrepancy 0.1 0.0 -1.3 -1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unallocated revenue (+)/ expenditure (-) 0.0 0.0 0.0 0.0 -0.7 -0.7 … … … … … … … … … …
Overall balance, before grants -0.7 -9.0 -6.8 -6.7 -8.0 -8.2 -6.4 -7.4 -4.0 -5.0 -2.2 -3.6 -0.1 -2.3 1.7 -1.0
Grants received 1.0 3.6 1.8 2.0 4.4 4.4 2.8 3.5 1.2 1.7 0.6 1.4 0.5 1.5 0.4 1.6
Project support 1.0 2.0 1.6 1.8 2.5 2.5 2.3 2.7 0.7 1.3 0.6 1.4 0.5 1.5 0.4 1.6
Budget support 0.0 1.5 0.2 0.2 1.9 2.0 0.5 0.8 0.5 0.5 0.0 0.0 0.0 0.0 0.0 0.0
Primary balance, after grants 3.5 -2.3 -2.3 -2.1 -0.2 -0.2 -0.6 -0.7 0.3 0.0 1.3 0.8 2.89 2.3 4.07 3.1
Overall balance, after grants 0.3 -5.4 -5.0 -4.8 -3.6 -3.7 -3.6 -3.9 -2.8 -3.3 -1.6 -2.2 0.4 -0.7 2.1 0.5
Financing -0.3 5.4 5.0 4.8 3.6 3.7 3.6 3.9 2.8 3.3 1.6 2.2 -0.4 0.7 -2.1 -0.5
Net external financing 1.8 2.4 0.9 0.6 0.7 0.6 0.2 0.3 0.2 0.2 -0.1 0.0 -0.4 -0.3 -0.5 -0.5
Disbursements 4.0 4.9 2.5 2.3 3.2 3.3 2.9 2.8 2.6 2.6 2.2 2.2 1.6 1.8 1.2 1.2
Project 2.7 2.3 2.2 2.0 2.1 2.2 2.0 2.0 1.9 1.8 1.8 1.8 1.5 1.6 1.1 1.1
Nonproject support 1.3 2.6 0.3 0.3 1.1 1.1 0.9 0.8 0.8 0.7 0.5 0.4 0.1 0.1 0.1 0.1
Of which budget support (including IMF) 0.8 2.1 0.0 0.0 0.9 0.9 0.7 0.6 0.6 0.6 0.3 0.3 0.0 0.0 0.0 0.0
Amortization -2.3 -2.5 -1.6 -1.6 -2.5 -2.6 -2.7 -2.6 -2.5 -2.3 -2.4 -2.2 -2.0 -2.1 -1.7 -1.7
Net domestic financing -2.8 1.9 3.7 3.7 3.6 3.8 3.5 3.7 2.6 3.0 1.7 2.2 0.0 1.0 -1.5 0.0
Of which: short term debt (net) 0.9 1.5 1.3 1.3 0.8 1.9 -0.6 -0.4 -1.3 -2.0 -0.6 -0.4 -0.3 0.0 -0.4 -0.3
Of which: issuances of medium term debt 2.4 5.3 3.9 3.9 3.6 2.8 4.5 5.3 6.0 6.8 4.0 5.2 2.6 4.8 1.1 3.2
o.w. SDR allocation 1.7 1.2
Of which: amortization of medium term debt -2.8 -3.0 -2.5 -2.5 -1.3 -1.5 -1.4 -1.9 -2.0 -1.8 -1.8 -2.6 -2.3 -3.7 -2.2 -2.8
Change in Deposits -3.3 -1.9 1.0 1.0 0.6 0.6 1.1 0.7 0.0 -0.1 0.0 0.0 0.0 -0.1 0.0 -0.1
Float from previous year³ -0.3 -0.4 -0.9 -0.9 -0.7 -0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Float at the end of the year³ 0.5 1.0 0.8 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Exceptional financing (external debt service) 4 0.6 0.6 0.5 0.5 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 0.0
Memorandum items:
Primary balance after grants (excl. the one-off and 2019 capital gains tax
revenues) -2.1 -2.3 -2.3 -2.1 -0.2 -0.2 -0.6 -0.7 0.3 0.0 1.3 0.8 2.9 2.3 4.1 3.1
Domestic primary balance⁵ 6.7 -0.9 1.3 1.0 0.2 0.2 1.1 0.7 1.8 1.6 3.2 2.8 4.5 4.0 5.2 4.3
Stock of Government Deposits 12.1 13.8 12.1 12.1 10.1 10.3 7.9 8.5 6.9 7.3 6.1 6.6 5.1 6.1 4.3 5.0

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, 2019–27

(Percent of non-LNG GDP)
2019 2020 2021 2022 2023 2024 2025 2026 2027
Est. Est. Est. Prelim. Proj.
Total revenue ¹ 29.0 23.9 25.8 25.7 25.7 26.2 27.1 28.0 29.5 30.4
Tax revenue 25.2 20.0 21.6 21.5 21.8 22.2 23.1 24.0 25.5 26.4
Taxes on income and profits 15.0 10.1 10.6 9.7 10.7 10.2 10.7 11.4 11.8 11.9
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 8.0 8.8 8.2 9.1 9.1 9.1 9.5 9.7
Taxes on international trade 1.8 1.5 1.7 1.7 1.6 1.5 1.5 1.6 1.7 1.7
Other taxes 0.7 1.0 1.2 1.2 1.2 1.4 1.7 1.9 2.6 3.1
Of which : Revenue from LNG … … … … … 0.1 0.3 0.4 1.0 1.5
Nontax revenue 3.8 3.9 4.3 4.3 3.9 4.0 4.0 4.0 4.0 4.0
Total expenditure and net lending 29.8 32.9 31.3 31.5 33.3 33.7 32.3 31.8 32.0 31.7
Current expenditure 22.0 23.3 23.8 24.0 26.2 25.1 25.4 24.6 23.9 23.7
Compensation to employees 12.2 13.2 14.0 14.1 14.6 14.3 14.2 13.7 13.0 12.6
Of which : Social insurance 0.5 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4
Goods and services 4.3 4.2 4.2 4.3 4.4 4.6 4.6 4.6 4.7 5.0
Interest on public debt 3.2 3.1 2.7 2.7 3.5 3.3 3.5 3.2 3.2 3.1
Domestic 1.8 1.6 1.6 1.7 2.5 2.3 2.7 2.5 2.4 2.3
External 1.4 1.5 1.1 1.0 1.0 0.9 0.8 0.7 0.8 0.7
Subsidies and transfers 2.3 2.8 2.9 2.9 3.7 3.0 3.2 3.1 3.0 3.0
Capital expenditure 7.1 8.8 7.1 7.2 6.7 8.2 6.6 7.0 7.8 7.7
Domestically financed 3.5 4.5 3.3 3.4 2.7 3.4 3.3 3.6 4.3 4.5
Externally financed 3.7 4.4 3.8 3.8 3.9 4.8 3.3 3.4 3.4 3.2
Net lending 2 0.7 0.7 0.3 0.3 0.4 0.4 0.3 0.3 0.3 0.3
Statistical Discrepancy 0.1 0.0 -1.3 -1.0 0.0 0.0 0.0 0.0 0.0 0.0
Unallocated revenue (+)/ expenditure (-) 0.0 0.0 0.0 0.0 -0.7 … … … … …
Overall balance, before grants -0.7 -9.0 -6.8 -6.7 -8.2 -7.5 -5.3 -3.8 -2.4 -1.2
Grants received 1.0 3.6 1.8 2.0 4.5 3.5 1.8 1.5 1.7 1.9
Project support 1.0 2.0 1.6 1.8 2.5 2.8 1.3 1.5 1.7 1.9
Budget support 0.0 1.5 0.2 0.2 2.0 0.8 0.5 0.0 0.0 0.0
Primary balance, after grants 3.5 -2.3 -2.3 -2.1 -0.2 -0.7 0.0 0.9 2.4 3.7
Overall balance, after grants 0.3 -5.4 -5.0 -4.8 -3.7 -4.0 -3.5 -2.4 -0.8 0.6
Financing -0.3 5.4 5.0 4.8 3.7 4.0 3.5 2.4 0.8 -0.6
Net external financing 1.8 2.4 0.9 0.6 0.6 0.3 0.3 0.0 -0.3 -0.6
Disbursements 4.0 4.9 2.5 2.3 3.3 2.9 2.7 2.4 1.9 1.5
Project 2.7 2.3 2.2 2.0 2.2 2.0 1.9 1.9 1.7 1.3
Nonproject support 1.3 2.6 0.3 0.3 1.1 0.8 0.8 0.5 0.2 0.1
Of which budget support (including IMF) 0.8 2.1 0.0 0.0 0.9 0.6 0.6 0.3 0.0 0.0
Amortization -2.3 -2.5 -1.6 -1.6 -2.6 -2.6 -2.5 -2.3 -2.2 -2.0
Net domestic financing -2.8 1.9 3.7 3.7 3.8 3.7 3.2 2.4 1.1 -0.1
Of which: short term debt (net) 0.9 1.5 1.3 1.3 1.9 -0.4 -2.1 -0.4 0.0 -0.4
Of which: issuances of medium term debt 2.4 5.3 3.9 3.9 2.8 5.4 7.2 5.6 5.2 3.8
o.w. SDR allocation 1.2
Of which: amortization of medium term debt -2.8 -3.0 -2.5 -2.5 -1.5 -1.9 -1.9 -2.8 -3.9 -3.3
Change in Deposits -3.3 -1.9 1.0 1.0 0.6 0.7 -0.1 0.0 -0.2 -0.1
Float from previous year³ -0.3 -0.4 -0.9 -0.9 -0.7 0.0 0.0 0.0 0.0 0.0
Float at the end of the year³ 0.5 1.0 0.8 0.8 0.0 0.0 0.0 0.0 0.0 0.0
Exceptional financing (external debt service) 4 0.6 0.6 0.5 0.5 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 -2.3 -2.3 -2.1 -0.2 -0.7 0.0 0.9 2.4 3.7
Domestic primary balance⁵ 6.7 -0.9 1.3 1.0 0.2 0.8 1.6 2.9 4.3 5.2
Stock of Government Deposits 12.1 13.8 12.1 12.1 10.3 8.5 7.3 6.6 6.1 5.0

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, 2019–27

(Billions of Meticais; unless otherwise indicated)
2019 2020 2021 2022 2023 2024 2025 2026 2027
Projections
Bank of Mozambique
Net foreign assets 213.2 250.9 159.1 115.4 122.5 147.0 175.1 247.3 294.1
(US$ billions) 3.5 3.4 2.5 … … … … … …
Net international reserves 221.6 261.6 186.8 … … … … … …
(US$ billions) 3.6 3.5 2.9 2.2 2.3 2.5 2.8 3.6 4.1
Net domestic assets -60.6 -84.6 -16.6 19.7 27.8 24.2 15.9 -27.3 -49.4
Credit to government (net) -103.7 -61.1 -59.8 -40.2 -23.9 -24.2 -24.4 -26.5 -27.5
Credit to banks (net) -47.4 -105.2 -81.1 -57.9 -79.4 -100.9 -126.3 -192.7 -235.3
Credit to the economy 3.9 5.0 6.0 5.7 6.4 7.3 8.1 9.3 10.4
Other items (net; assets +) 86.6 76.8 118.2 112.1 124.7 142.1 158.4 182.5 203.0
Reserve money 152.6 166.3 142.4 135.1 150.2 171.2 190.9 220.0 244.6
Currency in circulation 59.6 68.7 72.7 74.1 83.5 94.7 106.1 121.2 134.2
Bank Deposits (reserves) in BM 93.0 97.6 69.7 61.0 66.8 76.5 84.8 98.8 110.5
Commercial Banks
(US$ billions) 0.6 0.8 1.3 … … … … … …
Net domestic assets 392.0 466.3 454.3 461.9 515.5 580.1 644.8 729.4 802.3
Banks' reserves 111.9 116.4 88.2 78.5 86.4 98.8 109.8 127.3 142.1
Credit to central bank (net) 46.3 102.1 78.7 57.9 79.4 100.9 126.3 192.7 235.3
Credit to government (net) 133.6 124.6 175.3 161.8 155.1 154.4 153.7 153.1 152.6
Other items (net; assets +) -126.9 -137.0 -155.1 -112.0 -112.8 -118.1 -123.6 -159.8 -193.6
Deposits 426.2 527.9 539.3 552.1 616.9 694.1 772.1 874.3 976.3
Demand and savings deposits 265.2 333.7 328.9 336.7 376.3 423.3 470.9 533.2 595.5
Time deposits 161.0 194.3 210.4 215.4 240.7 270.8 301.2 341.1 380.9
Monetary Survey
(US$ billions) 4.0 4.2 3.8 … … … … … …
Net domestic assets 220.8 266.3 350.8 403.1 456.9 505.5 550.8 574.8 610.9
Domestic credit 260.9 328.7 388.7 403.0 445.0 481.6 516.0 552.0 601.4
Credit to government (net) 30.0 63.5 115.5 121.6 131.2 130.1 129.4 126.7 125.1
Of which: in foreign currency 35.2 49.8 41.2 43.3 48.3 54.1 59.6 65.5 73.4
Other items (net; assets +) -40.1 -62.4 -37.9 0.1 11.8 23.9 34.8 22.8 9.4
Money and quasi money (M3) 468.2 578.8 595.0 608.8 680.8 766.6 853.3 967.0 1,078.9
Foreign currency deposits 112.8 157.2 144.4 149.8 163.6 179.8 196.1 216.5 248.0
(US$ billions) 1.8 2.1 2.3 … … … … … …
M2 355.3 421.7 450.6 458.9 517.1 586.7 657.2 750.5 830.9
Currency outside banks 42.0 50.9 55.6 56.7 63.8 72.4 81.1 92.7 102.6
Domestic currency deposits 313.4 370.8 395.0 402.3 453.3 514.3 576.0 657.8 728.3
Memorandum Items
12-month percent change
Reserve money 19.1 9.0 -14.4 -5.1 11.2 14.0 11.5 15.2 11.2
M2 14.3 23.9 2.2 1.9 12.7 13.5 12.0 14.2 10.7
M3 12.1 23.6 2.8 2.3 11.8 12.6 11.3 13.3 11.6
Money multiplier (M2/reserve money) 2.33 2.53 3.16 3.40 3.44 3.43 3.44 3.41 3.40
Velocity (GDP/M2) 2.71 2.33 2.29 2.49 2.50 2.57 2.57 2.50 2.76
Nominal GDP 963 983 1,033 1,142 1,292 1,509 1,687 1,878 2,291
Nominal GDP growth 7.5 2.2 5.0 10.6 13.2 16.7 11.8 11.3 22.0
Sources: Bank of Mozambique (BM) and IMF staff estimates and projections.

Table 4a. Mozambique: Balance of Payments, 2019–27

(Millions of U.S. dollars; unless otherwise indicated)
2019 2020 2021 2022 2023 2024 2025 2026 2027

Est. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj.
Current account balance -2,934 -3,869 -3,730 -8,120 -7,408 -7,616 -2,895 -8,096 -7,779 -8,493 -9,074 -6,732 -10,173 -2,753 -7,946
Trade balance for goods -2,084 -2,294 -2,252 -6,287 -5,567 -2,507 -1,028 -1,829 -1,516 -1,789 -1,578 294 -1,858 3,027 635
Of which: Megaprojects 1,874 1,730 3,241 -487 420 2,874 4,764 3,578 4,354 3,768 4,302 6,238 4,229 9,332 6,997
Exports, f.o.b. 4,669 3,588 5,583 6,702 7,756 7,073 7,565 8,194 8,607 8,613 9,045 10,897 9,254 13,613 11,883
Megaprojects 3,278 2,504 4,035 4,908 5,982 5,107 5,639 6,149 6,593 6,481 6,935 8,623 7,002 11,132 9,426
Other 1,390 1,084 1,547 1,794 1,774 1,966 1,926 2,045 2,014 2,132 2,109 2,274 2,252 2,481 2,457
Imports, f.o.b. 6,753 5,883 7,834 12,990 13,323 9,580 8,593 10,023 10,123 10,402 10,622 10,603 11,112 10,586 11,249
Megaprojects 1,404 774 794 5,395 5,562 2,233 875 2,572 2,240 2,713 2,633 2,385 2,774 1,800 2,429
Other 5,348 5,109 7,040 7,594 7,761 7,347 7,718 7,451 7,883 7,689 7,989 8,218 8,339 8,787 8,820
Services (net) -1,819 -1,966 -1,865 -2,303 -2,086 -5,381 -1,629 -6,432 -5,768 -6,868 -6,975 -5,997 -7,489 -4,471 -6,740
Megaprojects -1,718 -1,632 -1,365 -1,962 -1,580 -4,980 -1,056 -5,998 -5,153 -6,405 -6,322 -5,434 -6,731 -3,696 -5,726
Other -101 -334 -371 -341 -506 -401 -573 -418 -600 -435 -624 -511 -717 -692 -935
Primary income (net) -276 -287 -340 -354 -575 -279 -848 -368 -1,063 -276 -1,020 -1,476 -1,365 -1,759 -2,428
Of which : Interest on public debt (net) 1 -243 -193 -161 -250 -175 -272 -205 -208 -205 -205 -203 -508 -248 -497 -524
Of which : Megaprojects (Net interest and dividends) 0 0 0 15 -187 48 -348 -171 -551 -146 -503 -1,130 -791 -1,476 -1,506
Secondary income (net) 1,245 678 726 824 821 551 610 534 568 439 499 446 540 450 588
Of which : External grants 79 250 209 493 491 214 278 188 224 82 142 76 171 65 205
Capital account balance 106 135 64.9 153 153 135 161 98 182 94 206 91 243 83 287
Financial account balance 4,524 4,014 3,136 7,441 6,562 7,565 2,764 8,230 7,845 8,878 9,157 7,332 10,775 3,782 8,140
Net foreign direct investment 3,410 3,035 5,102 2,529 3,055 2,226 1,490 2,306 2,900 2,512 3,095 594 3,093 1,418 1,192
Megaprojects 954 2,568 3,080 1,538 2,269 1,219 623 1,270 2,002 1,441 2,165 -246 2,323 544 313
Other 2,456 466 2,022 991 785 1,007 868 1,036 898 1,071 930 841 771 873 879
Borrowing (net) by the general government 413 7 31 -81 -92 -98 -93 -101 -92 -92 -81 -111 -93 -178 -410
Disbursements 698 326 295 426 432 431 436 438 443 450 454 437 441 356 359
2
Repayments 284 319 264 507 523 529 529 539 535 541 535 548 534 533 769
Loans (net) by the nonfin private sector 904 883 -1,049 668 717 520 570 580 640 657 726 745 823 818 904
Megaprojects 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Other 904 883 -1,049 668 717 520 570 580 640 657 726 745 823 818 904
Other financial flows (net) 3 -203 90 -947 4,325 2,882 4,917 797 5,445 4,397 5,801 5,417 6,104 6,952 1,723 6,454
Of which: Megaproject trade credit (net) -3,708 -5,324 -13 1,643 512 -2,126 920 -2,054 1,127 -2,109 1,267 -2,133 -3,085 -1,619
Of which: net SDR -1 6 300 0 0 0 0 0 0 0 0 0 0 0 0
Net errors and omissions -894 -96 -68 0 0 0 0 0 0 0 0 0 0 0 0

Overall balance 802 184 -597 -526 -693 84 31 233 248 478 289 691 846 1,112 481
Financing -802 -184 597 526 693 -84 -31 -233 -248 -478 -289 -691 -846 -1,112 -481
Reserve assets (- = increase) -1,209 -726 403 394 564 -187 -127 -350 -360 -486 -298 -600 -761 -1,011 -396
Of which : SDR allocation (- = increase) 17 0 -305 0 0 0 0 0 0 0 0 0 0 0 0
Net use of credit 73 281 -26 133 129 102 97 117 112 8 9 -91 -85 -101 -85
Of which : IMF disbursements/Financing gap (+) 118 309 0 159 155 129 123 130 124 65 62 0 0 0 0
Of which : Repayments to the IMF (-) -44 -28 -26 -26 -26 -26 -26 -12 -11 -57 -54 -91 -85 -101 -85
Exceptional financing 4 334 261 220 0 0 0 0 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 -27.3 -23.6 -44.9 -41.5 -39.0 -14.7 -37.6 -35.5 -37.0 -38.9 -25.4 -40.9 -9.0 -27.1
excl. megaprojects (MP) (Percent of GDP) -24.9 -28.0 -34.7 -31.4 -33.9 -28.7 -31.7 -26.0 -29.3 -25.5 -28.0 -24.8 -27.5 -23.4 -26.1
5
excl. MP and indirect MP imports (Percent of GDP) -16.9 -18.0 -22.3 -19.6 -16.2 -17.0 -19.3 -14.6 -17.0 -14.1 -16.5 -14.1 -16.4 -13.3 -16.2
Net foreign assets 3,468 3,350 2,493 1,967 1,800 2,051 1,831 2,284 2,079 2,762 2,368 3,453 3,213 4,564 3,695
Net international reserves 6 3,605 3,493 2,927 2,400 2,234 2,485 2,265 2,717 2,512 3,196 2,801 3,886 3,647 4,998 4,128
Gross international reserves 3,884 4,070 3,470 3,076 2,905 3,263 3,031 3,613 3,389 4,099 3,686 4,700 4,447 5,710 4,834
Months of next year's imports of goods and services 5.4 4.6 2.5 2.3 3.1 2.2 2.1 2.4 2.2 2.8 2.2 3.5 2.8 4.2 3.0
Months of projected imports of G&S (under full debt service) 5.4 4.6 2.5 2.3 3.1 2.2 2.1 2.4 2.2 2.8 2.2 3.5 2.8 4.6 3.3
Months of next year's imports of goods and services, excl. MP 7.5 5.8 4.5 4.2 3.7 4.4 3.8 4.7 4.2 5.0 4.3 5.3 4.9 6.5 5.3
Percent of broad money (M2) 67.2 72.3 49.2 40.0 40.5 39.4 39.0 40.3 40.7 42.8 41.3 44.5 46.7 49.1 46.1
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, 2019–27

(Percent of GDP)
2019 2020 2021 2022 2023 2024 2025 2026 2027

Est. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj. Prog. Proj.
Current account balance -19.1 -27.3 -23.6 -44.9 -41.5 -39.0 -14.7 -37.6 -35.5 -37.0 -38.9 -25.4 -40.9 -9.0 -27.1
Trade balance for goods -13.5 -16.2 -14.3 -34.8 -31.2 -12.8 -5.2 -8.5 -6.9 -7.8 -6.8 1.1 -7.5 9.9 2.2
Of which: Megaprojects 12.2 12.2 20.5 -2.7 2.4 14.7 24.1 16.6 19.9 16.4 18.4 23.5 17.0 30.5 23.9
Exports, f.o.b. 30.3 25.3 35.4 37.0 43.4 36.2 38.3 38.1 39.3 37.5 38.8 41.0 37.2 44.6 40.6
Megaprojects 21.3 17.7 25.6 27.1 33.5 26.2 28.6 28.6 30.1 28.2 29.7 32.5 28.1 36.4 32.2
Other 9.0 7.7 9.8 9.9 9.9 10.1 9.8 9.5 9.2 9.3 9.0 8.6 9.0 8.1 8.4
Imports, f.o.b. 43.9 41.6 49.7 71.8 74.6 49.1 43.5 46.6 46.2 45.3 45.5 39.9 44.6 34.6 38.4
Megaprojects 9.1 5.5 5.0 29.8 31.2 11.4 4.4 12.0 10.2 11.8 11.3 9.0 11.1 5.9 8.3
Other 34.8 36.1 44.6 42.0 43.5 37.6 39.1 34.6 36.0 33.5 34.2 31.0 33.5 28.8 30.1
Services (net) -11.8 -13.9 -11.8 -12.7 -11.7 -27.6 -8.3 -29.9 -26.3 -29.9 -29.9 -22.6 -30.1 -14.6 -23.0
Megaprojects -11.2 -11.5 -8.7 -10.8 -8.9 -25.5 -5.4 -27.9 -23.5 -27.9 -27.1 -20.5 -27.0 -12.1 -19.6
Other -0.7 -2.4 -2.4 -1.9 -2.8 -2.1 -2.9 -1.9 -2.7 -1.9 -2.7 -1.9 -2.9 -2.3 -3.2
Primary income (net) -1.8 -2.0 -2.2 -2.0 -3.2 -1.4 -4.3 -1.7 -4.8 -1.2 -4.4 -5.6 -5.5 -5.8 -8.3
1
Of which: Interest on public debt (net) -1.6 -1.4 -1.0 -1.4 -1.0 -1.4 -1.0 -1.0 -0.9 -0.9 -0.9 -1.9 -1.0 -1.6 -1.8
Of which: Megaprojects (net Interest and dividends) 0.0 0.0 0.0 0.1 -1.0 0.2 -1.8 -0.8 -2.5 -0.6 -2.2 -4.3 -3.2 -4.8 -5.1
Secondary income (net) 8.1 4.8 4.6 4.6 4.6 2.8 3.1 2.5 2.6 1.9 2.1 1.7 2.2 1.5 2.0
Of which: External grants 0.5 1.8 1.3 2.7 2.8 1.1 1.4 0.9 1.0 0.4 0.6 0.3 0.7 0.2 0.7
Capital account balance 0.7 1.0 0.4 0.8 0.9 0.7 0.8 0.5 0.8 0.4 0.9 0.3 1.0 0.3 1.0
Financial account balance 29.4 28.4 19.9 41.1 36.8 38.8 14.0 38.3 35.8 38.7 39.3 27.6 43.3 12.4 27.8
Net foreign direct investment 22.2 21.4 32.3 14.0 17.1 11.4 7.6 10.7 13.2 10.9 13.3 2.2 12.4 4.6 4.1
Megaprojects 6.2 18.1 19.5 8.5 12.7 6.2 3.2 5.9 9.1 6.3 9.3 -0.9 9.3 1.8 1.1
Other 16.0 3.3 12.8 5.5 4.4 5.2 4.4 4.8 4.1 4.7 4.0 3.2 3.1 2.9 3.0
Borrowing (net) by the general government 2.7 0.0 0.2 -0.4 -0.5 -0.5 -0.5 -0.5 -0.4 -0.4 -0.3 -0.4 -0.4 -0.6 -1.4
Disbursements 4.5 2.3 1.9 2.4 2.4 2.2 2.2 2.0 2.0 2.0 1.9 1.6 1.8 1.2 1.2
Repayments 2 1.8 2.3 1.7 2.8 2.9 2.7 2.7 2.5 2.4 2.4 2.3 2.1 2.1 1.7 2.6
Loans (net) by the nonfin private sector 5.9 6.2 -6.7 3.7 4.0 2.7 2.9 2.7 2.9 2.9 3.1 2.8 3.3 2.7 3.1
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
Other 5.9 6.2 -6.7 3.7 4.0 2.7 2.9 2.7 2.9 2.9 3.1 2.8 3.3 2.7 3.1
3
Other financial flows (net) -1.3 0.6 -6.0 23.9 16.1 25.2 4.0 25.3 20.1 25.3 23.2 23.0 27.9 5.6 22.1
Net errors and omissions -5.8 -0.7 -0.4 0.0 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 -3.8 -2.9 -3.9 0.4 0.2 1.1 1.1 2.1 1.2 2.6 3.4 3.6 1.6
Financing -5.2 -1.3 3.8 2.9 3.9 -0.4 -0.2 -1.1 -1.1 -2.1 -1.2 -2.6 -3.4 -3.6 -1.6
Reserve assets (- = increase) -7.9 -5.1 2.6 2.2 3.2 -1.0 -0.6 -1.6 -1.6 -2.1 -1.3 -2.3 -3.1 -3.3 -1.4
Net use of credit 0.5 2.0 -0.2 0.7 0.7 0.5 0.5 0.5 0.5 0.0 0.0 -0.3 -0.3 -0.3 -0.3
Of which: IMF disbursements/Financing gap (+) 0.8 2.2 0.0 0.9 0.9 0.7 0.6 0.6 0.6 0.3 0.3 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 -0.1 -0.2 -0.2 -0.3 -0.3 -0.3 -0.3
Exceptional financing 4 2.2 1.8 1.4 0.0 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
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, 2021-27

(Millions of U.S. dollars; unless otherwise indicated)
2021 2022 2023 2024 2025 2026 2027
Prel. Proj.
Financing requirements 4,230 8,448 3,727 8,550 9,805 10,962 9,005

Current account deficit excl. grants 3,940 7,899 3,172 8,003 9,216 10,343 8,151
of which: Megaprojects -1,876 1,347 -3,360 1,350 2,523 3,293 234
1/
of which: Public sector interest payments 161 175 205 205 203 248 524
Public sector loan amortization 264 523 529 535 535 534 769
Interest and amortization payments on existing Fund loans 26 26 26 11 54 85 85
Financing sources 4,271 7,944 3,454 8,326 9,743 10,962 9,005

Capital account balance 65 153 161 182 206 243 287
Net foreign direct investment 5,102 3,055 1,490 2,900 3,095 3,093 1,192
of which: Megaprojects 3,080 2,269 623 2,002 2,165 2,323 313
Public sector loan disbursements 295 432 436 443 454 441 359
Public sector grants 209 141 128 124 142 171 205
Non-financial private sector loans (net) -1,049 717 570 640 726 823 904
of which: Megaprojects 0 0 0 0 0 0 0
Other capital flows (net) -947 2,882 797 4,397 5,417 6,952 6,454
Change in reserves (+ decrease) 403 564 -127 -360 -298 -761 -396
Exceptional financing 2/ 193 0 0 0 0 0 0
Financing Gap 26 504 273 224 62 0 0
CCRT 26 0 0 0 0 0 0
Public sector program grants 0 350 150 100 0 0 0
of which: World Bank 0 300 150 100 0 0 0
of which: EU 0 50 0 0 0 0 0
Financing from IMF (RCF/ECF disbursement) 0 155 123 124 62 0 0
1
Includes payments on EMATUM bond but excludes interest on Fund loans.
2
Exceptional financing consists of external debt service arrears on defaulted loans.

34
Table 6. Mozambique: Financial Soundness Indicators for Commercial Banks and Deposit Takers, 2018–22
(In percent; unless otherwise indicated)
INTERNATIONAL MONETARY FUND
Dec-18 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
Capital Adequacy
Regulatory capital to risk-weighted assets 23.8 23.5 24.0 26.2 28.8 25.2 25.2 26.5 26.1 26.2 25.6 27.88 26.19 25.47 26.76 26.70
Regulatory Tier I capital to risk-weighted assets 22.6 22.4 22.9 25.8 28.7 25.1 25.4 27.0 27.2 27.2 26.6 28.48 26.71 26.01 27.33 27.16
Capital (net worth) to assets 11.4 11.4 11.4 12.3 12.7 11.5 11.4 12.1 11.8 11.9 11.6 12.86 12.85 11.85 12.49 13.01
Tier 1 Capital to total Assets 10.8 10.9 10.9 12.1 12.6 11.5 11.5 12.3 12.3 12.3 12.0 13.14 13.11 12.11 12.76 13.24
Asset Quality
Nonperforming loans to gross loans ¹ 11.1 11.5 10.6 10.1 10.2 10.3 12.6 11.8 9.8 9.8 9.9 9.76 10.60 9.19 10.02 9.28
Total provision to NPLs 95.7 99.5 96.2 103.2 93.5 84.5 78.4 82.5 78.3 81.0 80.8 77.86 76.87 75.46 73.13 79.56
NPLs net of provisions to total capital 3.5 2.9 3.6 2.9 3.9 4.4 12.2 9.6 9.7 8.7 8.9 8.46 8.97 9.40 10.56 8.91
NPLs net of provisions to capital and reserves 2.1 1.8 2.2 1.9 2.6 2.8 7.7 6.3 6.6 5.9 5.8 5.85 6.01 6.35 7.52 6.18
Specific provisions to NPLs 92.2 93.4 90.9 91.8 88.7 89.0 75.0 78.8 74.1 76.4 75.3 73.27 72.63 70.67 67.99 71.99
Earnings and Profitability
Return on Equity 29.8 33.7 27.3 26.7 24.9 25.5 20.2 20.1 18.7 24.3 24.6 23.09 25.15 27.54 26.40 25.36
Return on Assets 3.1 3.7 3.1 3.1 3.0 3.0 2.4 2.4 2.2 2.9 2.9 2.79 3.10 3.43 3.29 3.17
Interest margin to gross income 71.6 64.8 68.3 67.9 67.6 66.8 68.5 67.2 65.9 66.2 64.9 66.63 64.08 66.77 67.10 68.03
Noninterest expenses to gross income 58.0 54.0 59.0 58.3 59.2 62.1 62.5 62.6 62.1 60.2 57.1 57.79 53.75 53.57 53.34 53.70
Personnel expenses to noninterest expenses 46.4 44.9 45.6 45.6 45.2 44.2 44.3 45.7 45.9 43.6 44.3 43.98 44.47 44.41 43.71 44.40
Trading and fee income to gross income 11.1 16.7 11.5 11.1 11.1 11.9 11.3 11.6 12.0 13.3 13.5 12.72 14.90 11.50 11.09 10.95
Fee and commission to total income 18.5 17.7 19.9 20.9 21.4 21.5 20.5 20.5 21.2 22.5 22.1 22.56 21.71 21.88 21.80 21.58
Liquidity
Liquid assets (core) to total assets 13.9 11.9 11.8 13.2 14.3 12.1 11.6 12.5 13.8 13.2 11.9 11.95 18.05 16.90 16.45 13.85
Liquid assets (broad measure) to total assets 39.3 37.2 37.5 39.8 39.3 40.7 40.5 40.6 42.5 43.6 41.2 41.73 47.89 49.25 48.65 46.55
Liquid assets (core) to total deposits 20.2 17.4 17.4 19.4 20.7 17.5 16.5 17.7 19.1 18.6 16.9 17.07 25.54 23.80 23.06 19.63
Liquid assets (core) to demand deposits 32.9 27.8 28.1 31.7 33.3 27.6 26.7 29.2 30.6 30.4 26.6 27.88 41.99 40.80 39.48 34.02
Liquid assets (core) to short term liabilities 19.9 17.0 17.4 19.1 20.4 17.2 16.5 17.3 19.0 17.9 16.5 16.73 25.74 24.54 23.26 19.98
Liquid assets (broad measure) to short term liabilities 56.2 53.0 55.4 57.3 56.1 57.8 57.8 56.0 58.5 59.0 56.9 58.40 68.30 71.50 68.81 67.15
Customer deposits to total (noninterbank) loans 168.6 170.4 173.8 177.1 182.7 186.4 186.4 186.1 204.3 203.8 195.8 192.80 199.12 208.78 208.03 193.79
Sensitivity to market risk
FX loans to FX deposits 1/ 64.2 49.4 48.8 52.3 47.8 47.1 46.2 48.5 37.1 43.5 42.3 42.59 34.12 36.22 35.88 36.15
FX loans to total loans 25.5 22.2 21.1 21.3 19.9 20.9 21.1 20.5 16.9 18.1 18.0 18.16 15.63 16.76 17.00 14.40
FX liabilities to total liabilities 24.5 25.3 23.9 22.9 23.4 25.3 26.3 25.4 26.2 23.8 23.2 23.14 23.73 24.22 25.11 23.19
Source: Bank of Mozambique (BM).

1/
Includes deposits at parent banks.
Table 7. Mozambique: Risk Assessment Matrix1/

Source of Risks Likelihood Horizon Impact Policy Response
Intensifying spillovers from Russia’s war in High ST Low Structural reforms to improve economic
Ukraine. Further sanctions resulting from the efficiency and enhance diversification
war and related uncertainties exacerbate trade
disruptions and commodity price volatility.
Commodity price shocks. Combined continuing High ST 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 negative demand shocks
causes recurrent commodity price volatility and
social and economic instability.
Systemic social unrest. Rising inflation, Medium ST, MT High Well-targeted subsidies for the needy and
declining incomes, deteriorating governance users of goods subject to higher prices.
climate, and worsening inequality amplify social
unrest and political instability slowing economic
growth and giving rise to economically
damaging populist policies (e.g., preserving fossil
fuel subsidies).
De-anchoring of inflation expectations. Medium ST, MT Medium Tighten monetary policy as needed.
Supply shocks to food and energy prices sharply
increase headline inflation and passthrough to
core inflation, de-anchoring inflation
expectations and triggering a wage-price spiral
in tighter labor markets.
Natural disasters related to climate change. High ST, MT High • Address infrastructure gaps.
More frequent natural disasters deal severe • Develop social safety nets.
damage to infrastructure and amplify supply • Investment (public and private) in climate
chain disruptions and inflationary pressures, resilient infrastructure and agriculture.
causing water and food shortages and reducing • Strengthen institutions to manage
medium-term growth. climate change risk.
Deterioration in security situation in Medium ST, MT High • Enhance security and socioeconomic
Mozambique. policies in northern region.
• Continue drive for durable peace and
implementation of reforms
Local Covid-19 outbreaks. Emergence of more Medium ST, MT Medium • Enhance health and social protection
contagious vaccine-resistant variants force new spending to address the impact of
lockdowns or inhibit commerce. This results in Covid’19 pandemic.
extended supply chain disruptions, and slower • Partial use of international reserves to
growth. cover external needs. • Mobilize additional
grants and concessional loans from
development partners to cover more
persistent external needs
Cyberthreats. Cyberattacks on critical physical Medium MT Low • Develop and implement a cybersecurity
or digital infrastructure (including digital risk regulatory and supervisory framework
currency platforms) trigger financial instability for the Bank of Mozambique.
and disrupt economic activities.
1
The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. 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 scenarios 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.

36
Table 8. Indicators of Capacity to Repay the Fund, 2022-2032
INTERNATIONAL MONETARY FUND
(In percent; unless otherwise indicated)
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Fund obligations based on existing credit
(in millions of SDRs)
Principal 9.470 18.930 8.520 39.760 62.480 69.300 76.110 67.590 36.350 13.630 6.820
Charges and interest 0.860 5.190 5.190 5.180 5.190 5.190 5.190 5.180 5.190 5.190 5.190
1
Obligations to the Fund based on existing and prospective credit
(in millions of SDRs)
Principal 9.470 18.930 8.520 39.760 62.480 69.300 89.740 99.400 86.340 68.160 61.340
Charges and interest 0.860 5.190 5.190 5.180 5.190 5.190 5.190 5.180 5.190 5.190 5.190
Obligations to the Fund from existing and prospective credit

In millions of U.S. dollars 13.900 32.076 18.337 60.448 91.571 101.372 129.188 142.320 124.561 99.820 90.539
In percent of gross international reserves 0.477 1.058 0.543 1.649 2.202 2.108 2.070 2.218 1.883 1.601 1.405
In percent of exports of goods and services 0.159 0.374 0.190 0.597 0.883 0.777 0.811 0.807 0.583 0.423 0.373
In percent of GDP 0.078 0.163 0.084 0.259 0.368 0.346 0.378 0.374 0.282 0.206 0.179
In percent of quota 4.547 10.616 6.034 19.780 29.784 32.786 41.783 46.030 40.286 32.284 29.283
Outstanding Fund credit based on existing drawings (end-of-period)

In millions of SDRs 399.490 380.560 372.040 332.280 269.800 200.500 124.390 56.800 20.450 6.820 0.000
Outstanding Fund credit based on existing and prospective drawings (end-of-period)

In millions of SDRs 444.930 516.880 599.240 604.920 542.440 473.140 383.400 284.000 197.660 129.500 68.160
In millions of U.S. dollars 598.694 687.372 801.479 813.663 734.031 643.884 521.759 386.488 268.990 176.233 92.757
In percent of gross international reserves 20.532 22.681 23.713 22.190 17.654 13.391 8.359 6.023 4.066 2.827 1.439
In percent of exports of goods and services 6.834 8.016 8.304 8.034 7.075 4.935 3.277 2.191 1.260 0.747 0.382
In percent of GDP 3.354 3.483 3.655 3.488 2.949 2.200 1.526 1.017 0.610 0.364 0.183
Use of IMF Credit

Net Use of IMF Credit (in millions of SDRs) 94.660 71.940 82.360 5.680 -62.480 -69.300 -89.740 -99.400 -86.340 -68.160 -61.340
Disbursements (in millions of SDRs) 45.440 90.880 90.880 45.440 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Repayments (in millions of SDRs) 18.940 18.940 8.520 39.760 62.480 69.300 89.740 99.400 86.340 68.160 61.340
Memorandum items:
Nominal GDP (in billions of U.S. dollars) 17.852 19.734 21.927 23.326 24.888 29.266 34.202 38.017 44.128 48.359 50.590
Exports of goods and services (in billions of U.S. dollars) 8.761 8.575 9.652 10.127 10.375 13.046 15.923 17.641 21.350 23.589 24.298
Gross international reserves (in billions of U.S. dollars) 2.916 3.031 3.380 3.667 4.158 4.808 6.242 6.417 6.616 6.234 6.445
Quota (in millions of SDRs) 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2 227.2
Source: 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. Schedule of Disbursements Under the ECF Arrangement, 2022-2025
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,
2021-2023 1
Debt Stock (end of period) Debt Service

2021 2021 2022 2023 2021 2022 2023
(In million US$) (Percent total debt) (Percent GDP) (In million US$) (Percent GDP)
Total 16961.5 100.0 104.8 1190.5 2301.2 1328.6 7.4 12.9 6.9
External2 13398.0 79.0 82.8 430.8 709.3 759.9 2.7 4.0 3.9
Multilateral creditors3 5056.8 29.8 31.3 163.8 196.7 215.6 1.0 1.1 1.1
IMF 489.8 2.9 3.0
World Bank 3166.8 18.7 19.6
ADB/AfDB/IADB 9.3 0.1 0.1
Other Multilaterals 1391.0 8.2 8.6
o/w: ADF/IFAD 1054.0 6.2 6.5
BADEA 94.1 0.6 0.6
Bilateral Creditors 4566.3 26.9 28.2 222.2 404.9 439.8 1.4 2.3 2.3
Paris Club 1060.8 6.3 6.6 35.7 78.7 82.4 0.2 0.4 0.4
o/w: Japan/Korea 636.0 3.7 3.9
France/Brazil 245.7 1.4 1.5
Non-Paris Club 3505.6 20.7 21.7 186.5 326.2 357.4 1.2 1.8 1.8
o/w: China/Portugal 2494.7 14.7 15.4
India/Iraq/Libya 747.2 4.4 4.6
Bonds 900.0 5.3 5.6 44.9 45.0 44.9 0.3 0.3 0.2
Commercial creditors 56.9 0.3 0.4 0.0 0.0 0.0 0.0 0.0 0.0
o/w: Senior creditors of LNG debt financing 43.0 0.3 0.3
Other international creditors 2818.0 16.6 17.4 0 46.5 22.8 0.0 0.3 0.1
4
o/w: ENH's LNG project partners 2818.0 16.6 17.4
5
Domestic 3563.4 21.0 22.0 760 1592 569 4.7 8.9 2.9
Held by residents, total
Held by non-residents, total
T-Bills 906.9 5.3 5.6
Bonds 1624.2 9.6 10.0
Loans 1032.4 6.1 6.4
Memo items:
Contingent liabilities 43.0 0.3 0.3
o/w: Public guarantees 43.0 0.3 0.3
Nominal GDP (millions US$) eop exchange rate 15745 17478 19199
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 2.2 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.

Annex I. Consultation with the IMF Executive Board on the

Missed Inflation Target Under the MPCC
Consultation on Breach of MPCC Target in June 2022.
Banco de Moçambique
November 4, 2022
In June 2022, CPI inflation increased to 10.8 percent, 0.8 percentage points above the upper
bound of the inflation consultation band of 10.0 percent, agreed under the ECF. This letter firstly
explains the reasons why inflation has breached the upper 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 second quarter of 2022, inflation accelerated, driven by exogenous external and
domestic factors, in the context of recovering aggregate demand as COVID-related restrictions were
lifted. In particular, the international food and energy price increase due to the war in Ukraine that
started at end-February 2022 and adverse weather events that affected domestic agricultural output
in March 2022 have driven inflation.
The war in Ukraine has prompted a surge in global food and fuel prices. As an oil importer,
Mozambique has been directly affected by the steep increase in oil prices. Despite government
measures to pass-through international price changes to domestic consumers gradually, the CPI
components for diesel and gasoline prices increased by 27 percent and 20 percent, respectively,
between January and June. Weighing about 7 percent in the CPI basket, these two products
contributed 2.2 percentage points to headline inflation. The contribution of transport prices
(including the prices of vehicles and transport services, in addition to fuel) increased from 1.4 per-
centage points in January to 2.9 percentage points in June. Similarly, the increase in global food
prices has sharply impacted inflation. The price of wheat flour and wheat bread have increased by
13.0 percent and 32.9 percent between January and June, respectively, with the total weight of
wheat-derived products at 4.3 percent in the CPI basket.
The harvest in the first half of 2022 was damaged by flooding associated with tropical
storms. While Mozambican food prices typically fall each month from May to August, the impact of
reduced supply outweighed this pattern and had a significant inflationary impact. Overall food price
inflation (including both imported and domestically produced products) reached 15.9 percent year-
on-year in June 2022, contributing 5.3 percentage points to headline inflation.

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, while avoiding undermining the
recovery of demand. Since January 2021, the BM has cumulatively increased the policy rate by
700bp, and real interest rates are among the highest in the region. The monetary policy tightening
since the start of last year is estimated to be sufficient to effectively contain inflation and guide it
towards the BM’s medium-term objective.
3. Inflation outlook
In August 2022, headline inflation for Mozambique stood at 12.1 percent year-on-year. At
the same time, CPI excluding fruit, vegetables and administered prices, remained substantially lower
at 6.8 percent year-on-year. The current baseline scenario is predicated on an expected moderation
in international food and fuel prices in 2023, that will ease inflationary pressures. 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. After peaking at
15.0 percent at the end of 2022, inflation is expected to decelerate to 8.5 percent at the end of 2023,
followed by a further deceleration towards 6.0 percent in 2024 and 5.5 percent in 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/
Rogério Lucas Zandamela, Governor

Appendix I. Letter of Intent

November 3, 2022
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 all 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 June 2022, we have met all four quantitative performance criteria (the floor on the
domestic primary balance, floor on net international reserves (NIR), ceiling on new non-concessional
external debt and the continuous performance criterion on non-accumulation of external debt
arrears). Similarly, we met all three indicative targets (ceilings on the present value of new external
debt and on the stock of domestic debt, and a floor on social spending). We have also submitted to
Parliament an amended anti-money laundering (AML) law, meeting the structural benchmark for the
first review and an important step forward in our governance and financial integrity agenda.
Russia’s war in Ukraine has led to sharp rises in imported food and fuel prices, while domestic food
prices were already affected by flooding. As a direct consequence of these shocks, consumer price
inflation exceeded the upper bound under the Monetary Policy Consultation Clause (MPCC) in June
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.
As the economic recovery gathers momentum with the lifting of COVID-related restrictions, we have
announced a package of economic activation measures (Pacote de Activação Económica) to support
private investment and reduce the drag from the less favorable international environment. Our
measures aim to reduce administrative burdens for investors, and align fiscal policy with our
development priorities, within the objectives and fiscal parameters of the program.

We are advancing with the core fiscal reforms needed to foster growth and achieve our debt
reduction objectives. With respect to VAT reform, we have adjusted the list of items on which
exemptions and zero ratings will be eliminated to align the reform with the government’s
development priorities in agriculture and renewable energy, while extending the list in other areas
to ensure that we meet our efficiency and tax base broadening objectives. The VAT rate will be cut
from 17 to 16 percent in 2023—½ a point more than previously agreed—to better align our regime
with neighboring countries and support the recovery. The elimination of exemptions and zero-
ratings were encapsulated in the amended VAT law expected to be submitted to parliament in
November 2022. To ensure yields from the reform align with our objectives under the program, we
are also reforming excise taxes. Regarding public sector wages, we are managing implementation
challenges within the cost envelope originally agreed, entailing some changes to the implementing
legislation, although we still expect to fully implement this reform this year. We are also exercising
restraint in the basic pay rise for the public sector in 2023, despite the strong cost-push from
unexpected inflation, and given our longer-term objective of reducing the budgetary pressure from
public sector remuneration.
We are moving ahead with our structural agenda. Following regional peer group evaluation of the
AML/CFT framework, amended laws for AML/CFT have been passed, and we are implementing risk-
based supervision of supervised entities’ money laundering risks among other steps. 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. The audit of COVID spending has led to internal
control improvements at the Ministry of Economy and Finance, and we anticipate regulating the
commercial code to collect beneficial ownership information for firms and submitting an amended
public probity law (albeit delayed to the third review), in the months ahead. We expect parliament to
approve a law creating a sovereign wealth fund to manage the anticipated large revenue flows from
natural resources before the end of the year. Next steps will include preparing the broader fiscal
framework and rules for the management of budget revenue. 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 first review and the related disbursement of SDR 45.44 million, and modification of the MPCC to
reflect inflationary pressures and our policy response. We also request extending the test dates for
the SBs on the quarterly commitment limits and the submission of the public probity law from end-
December 2022 to end-January 2023 and end-June 2023, respectively, and modifying the IT for end-
June 2023. Finally, we request an additional adjustor for the IT setting a ceiling on domestic debt, to
reflect the planned securitization of past VAT refund arrears. 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 Tonela Rogério 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 the key development priorities in the

quinquennial program that aim to foster sustained inclusive growth and strengthen
governance and institutions. The program centers on developing human capital, promoting
gender equity and social inclusion, and protecting the most vulnerable. The program supports
economic growth and decentralization while safeguarding fiscal and debt sustainability, it also
proposes a stable and transparent institutional framework for the management of natural resource
wealth, particularly for hydrocarbons.
2. Despite the common emerging challenges facing all economies, the government is
determined to pursue a sustainable development path for Mozambique. The government is
determined to overcome these significant challenges which include: the fragile global recovery from
the COVID-19 pandemic; terrorist attacks in the country’s north; more frequent and intense natural
disasters driven by a changing global climate; and fluctuating global economic circumstances such
as sharply increasing inflation, particularly for energy and wheat, as well as disrupted global supply
chains which impact directly on the country’s immediate access to important goods.
3. The government’s Economic and Financial Program 2022-2025 (EFP), supported by the
ECF, aims to foster sustainable and inclusive growth. The government is supporting economic
recovery by addressing debt and structural challenges contributing to macroeconomic
vulnerabilities and driving protracted balance of payment (BOP) needs, whilst avoiding a large
upfront adjustment. The EFP aims to ensure public debt levels decline over the medium term. The
government continues to build institutions and capacity to manage public resources efficiently.
These include: i) applying appropriate fiscal rules and institutions for LNG resources; ii) addressing
concerns around governance, transparency, and corruption; and iii) enhancing equality of
opportunity and greater social inclusion.
4. The IMF Executive Board approved a three-year arrangement under the Extended
Credit Facility (ECF) to support the implementation of Mozambique’s EFP on May 9, 2022. The
ECF aims to promote economic recovery and foster policies that reduce public debt and financing
vulnerabilities, while creating space for 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
BoP needs.
5. The government has met its ECF fiscal and international reserves targets for end-June
2022 (Table 1). The quantitative performance criterion on the floor of the primary budget balance
was met, at MT 3.8 billion compared to a target of MT -2.6 billion. The quantitative performance
criterion on the floor of net international reserves of the Bank of Mozambique (BM) was met,
adjusted by the amount of the delayed disbursement of the European Union (EU) grant of

EUR 50 million that was initially expected at end-June but is now expected later in 2022. The
indicative target on the ceiling on the stock of domestic debt (accordingly adjusted by the amount
of the delayed disbursement of the EU grant), was met at MT 250.7 billion, relative to a program
target of MT 253 billion.
6. CPI inflation increased to 10.8 percent at end-June 2022, above the upper bound of
the inflation band of 10 percent, triggering the consultation clause under the program. In a
letter addressed to the IMF Executive Board, the government explains that inflation breached the
upper limit of the inflation consultation band due to exogenous external (the military conflict in
Ukraine, which started at end-February 2022) and exogenous domestic factors (adverse weather
events that partly destroyed agriculture output in March 2022) that impacted fuel and food prices. In
March 2022, when inflation was still below the upper band, the BM reacted to an increase in
expected inflation by raising the policy rate (MIMO) by 200bp, from 13.25 percent to 15.25 percent.
The monetary policy tightening since January 2021 is estimated to be sufficiently effective in
containing inflation and directing it towards the BM’s single digit target in the medium-term. After
peaking at 15 percent at end-2022, inflation is expected to decelerate to 8.5 percent at end-2023,
followed by a further deceleration towards 6 percent in 2024 and 5.5 percent in 2025. This baseline
scenario is predicated on international food and fuel prices that are expected to moderate in 2023
and contribute to easing inflationary pressures.
7. The structural benchmark under the ECF was successfully met. The AML/CFT law was
passed by parliament in May 2022 (Structural Benchmark - submission to Parliament prior to end-
June 2022).
8. Other structural measures stated in the May 2022 Memorandum of Economic and
Financial Policies (MEFP) were completed.
• To progress in the management of public resources - The government published a revised

medium-term debt strategy along with quarterly (I-2022 and II-2022) and annual public debt reports
(2021). The provision to limit the period for taxpayers to claim refunds to twelve months, with
refunds to be carried-forward and credited against future VAT liabilities, is included in the revised
VAT code proposal.
• To continue building the basis for an inflation targeting framework, with IMF and
Norges Bank support:
• Forecasting. The BM has started to split agriculture and non-agriculture GDP in its
quarterly projections model.
• In monetary operations, the BM has strengthened the collateral framework for repos by
publishing the haircuts applied by government securities held by commercial banks in
August 2022.
• To reform the foreign exchange (FX) market, the BM Board approved the FX intervention
strategy in June 2022.

• To strengthen the AML/CFT framework - The BM has started implementing its risk-based
supervision framework for AML/CFT, with support from the Banque de France. The National
Risk Assessment was published in March 2022 while risk-based requirements and proposed
internal supervisory procedures pertaining to banks, microcredit institutions, MVTS and
VASPS were also introduced then. By June 2022, the BM had mapped the inherent risk of
national banks after calibrating the respective risk assessment model of banks and
microcredit institutions based on survey data. A pilot inspection of one of the largest
national banks, using the methodology and risk-based monitoring tool was conducted in
July 2022 while a risk-based inspection of a medium-size national bank was conducted in
September. Credit institutions are mandated by the implementing regulations to the
AML/CFT laws to send annual risk assessments to the BM.
• To progress in its financial inclusion agenda, the Parliament approved a law establishing
simplified criteria for opening bank accounts in October 2022.
• To continue implementing recommendations from the 2020 Safeguards Assessment,

the BM published the audit of its 2021 accounts.
• To continue gradually removing restrictions on capital and financial account

international transactions, the Parliament approved the revision of FX law in October 2022.
9. The government remains fully committed to the May 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 national economy is recovering from the COVID-19 pandemic, despite the global
inflationary shock. Following the recovery in 2021 of 2.3 percent, real GDP growth in 2022 is
projected to reach 3.8 percent. The acceleration in growth is primarily driven by rising agricultural
production, mining, and services. The start of LNG production in Q4 of 2022 is expected to
meaningfully contribute to real GDP growth from 2023 onwards.
11. Global inflationary pressures are creating new challenges. Inflation has accelerated
sharply in 2022, reaching 12.1 percent (y/y) in August, though measures for core inflation have
remained relatively more stable at around 6 to 7 percent. The BM’s proactive monetary policy
response is expected to keep inflation expectations and second-round effects well controlled. The
current account deficit widened significantly due to the import of the LNG offshore platform. Higher
fuel prices led to a growing fuel import bill, which is the main reason for the steady decline in
international reserves, from 4.5 months of goods and services (excluding megaprojects) at end-2021
to 3.7 months at end-August 2022.
12. Consumer price inflation is projected to peak at around 15 percent in December 2022,
before moderating to 8.5 percent at end-2023. In 2022, the BM will maintain its current, cautious

monetary policy stance and stands ready to take further action as appropriate to ensure that
inflation expectations remain well-anchored within single digits. Over the medium term, as financing
conditions improve and fiscal pressures abate, the BM will explore scope for easing policy to allow
for lower real lending rates and higher credit growth subject to continuing moderate inflation
expectations, settling between 5 and 6 percent, and financial sector strength.
13. The government expects an improvement in the fiscal position in 2022. The primary
deficit after grants, on a modified cash basis 1 is expected to decline from MT 21.2 billion (2.1 percent
of GDP) in 2021 to MT 2.7 billion (0.2 percent of GDP) in 2022. The overall deficit after grants, on a
modified cash basis is projected to decline from MT 49.3 billion (4.8 percent of GDP) in 2021 to
MT 42.9 billion in 2022 (3.8 percent of GDP). This reflects projected budget support grants in 2022
(including US$300 million from the World Bank and use of MT 13.4 billion of the 2021 Special
Drawing Rights (SDR) allocation) and less reliance on domestic debt.
14. The government is strengthening social protection and working to reduce poverty. An
updated National Development Strategy will be submitted to Parliament by March 2023, while the
National Strategy for Basic Social Security 2016-2024 aims to strengthen social protection and
outlines macroeconomic and financial policies to support poverty reduction. The government will
continue to provide resources for social protection programs with a budget allocation of MT 6.8 bil-
lion in 2023 (0.5 percent of GDP), with an indicative target of an increase of around MT 1 billion in
2023. Going forward, INAS looks to increase the number of beneficiaries and expand the social
protection program. In addition to the Basic Social Subsidy, the government aims to improve
efficiency through digitalization and enhancing cash controls by reconciling payments with
e-SISTAFE.
15. The government is working to expand the reach, effectiveness, and efficiency of social
support programs. The expansion of registered vulnerable households during the COVID-19 crisis
was significant. Programs are being developed to link the register with: i) other existing social
support programs (identifying those qualifying for other programs); or ii) other sectors (e.g., linking
temporary social protection with vulnerable beneficiaries under the SUSTENTA agricultural support
program for small farmers). The scope for using social protection programs to support the
rehabilitation of families displaced by the conflict in the North is also being explored. A single, cross-
government registry of vulnerable households is being developed with World Bank support. The
government is hoping these projects will be completed by end 2023, but is limited to the financial
constraints it faces. The cost efficiency of delivering support alongside ongoing development of
conditional social transfer schemes remain a priority. Support to vulnerable households was
provided through mobile money for the first time (in areas with cellphone coverage) during the
pandemic. The identification of beneficiaries and capacity to log payments made in real time
continues to improve.
16. 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
1
Modified cash balances are adjusted for payments in arrears.

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.
17. 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 has begun in October 2022,
generating an estimated addition to economic growth in 2023 of about 1.3 percentage points, rising
further in 2024 and 2025, while 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.
18. 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 appreciating exchange rate that could undermine non-hydrocarbon sector
competitiveness, bring about asset price inflation, and other distortions to the wider economy.
C. Creating Space for Priority Spending while Addressing Public Debt

Vulnerabilities
19. Given the high level of public debt, the government’s policies will continue to focus on
long-term sustainability. Reversing the rising trend of the debt-to-GDP ratio (106.7 percent at
end-2021) 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.
20. The government will adopt strong fiscal policies to achieve this objective. From a
primary balance after grants of -2.1 percent of GDP in 2021, the aim is to achieve a primary surplus
by 2024. The following measures underpin this goal:
• Public employment and compensation reforms. The State’s public sector wage bill (at
14.1 percent of GDP in 2021), exceeds average regional levels and those observed in peer
countries. The government is implementing measures to better manage the cost of public
sector employment and to align the wage bill more closely with regional averages (as a
proportion of GDP) by 2026.
In 2021 the Parliament passed several reforms unifying a large number of different pay
scales and supplementary pay components across the public sector into a unique scheme
applying to all public sector employees. This will facilitate employee movements in and out
of public sector positions, and rebalance compensation towards basic wages, promoting
better control and predictability of the wage bill.

Savings will be achieved through revising the wage increase formula, and freezing wage
supplements in nominal terms. The reforms are expected to have an upfront cost of
MT 9.6 billion (0.7 percent of GDP) in 2022, and a full year cost of MT 19.2 billion from 2023
(the net cost is lower because of expected higher income tax). These cost estimates were
revised upwards during the early stages of implementation as staff appeals were heard and
new information came to light. Following temporary suspension of the transition to the new
salary scales, legal amendments modifying the criteria used to map individuals from the old
to the new salary scales were passed by Parliament in October 2022 to fully correct for these
factors and ensure the costs remain within the original envelope, while ensuring all civil
servants are fairly treated under the reform. Should costs again rise above the allocated
envelope, the government will utilize existing mechanisms to offset the additional cost and,
if necessary, will pass a supplementary budget in the first half of 2023.
This one-off cost is being partially offset through restraining increases in public sector wage
levels (aside from the impact of the reform) to below inflation in 2022 and 2023; and only
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 (Ministério da Administração Estatal e da Função Pública—
MAEFP), and the attrition rule will be maintained in 2023 and 2024 (structural benchmark).
Finally, the government will implement further measures to reduce the pressure on the wage
bill, these include: (i) evaluating the functional structure across the public sector (ministries,
local government structures, public institutions), with a view to reducing duplication in
activities and institutional overlap; (ii) developing a policy which will encourage early
retirement; and (iii) implementing the reforms to the EGFAE Statute recently approved by
the Parliament which determine the retirement age.
Should savings fall short of expectations, additional measures to ensure convergence of the
wage bill to GDP ratio towards regional and peer group averages will be considered.
• Contingency funds. The 2023 budget will also provide for contingency funds to address risks
identified in the Report on Fiscal Risks for 2023.
• VAT reform. Broadening the VAT base will build a robust and fair revenue collection
mechanism that does not depend on volatile commodity revenues. The government is
committed to eliminating some VAT exemptions and domestic zero-ratings. To minimize the
impact on the most vulnerable households, exemptions and zero-ratings on basic items will
be maintained, as will exemptions for the agricultural and renewables sectors in line with
government development priorities. The necessary legal changes to implement the
elimination of VAT exemptions and zero-ratings are expected to be made in November 2022
to ensure the reform is effective starting on January 1st, 2023 (prior action). 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 (¶37).

• 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 tax administration (¶¶32 to 37), and PFM (¶¶38 to 43).
21. The government is continuing to strengthen institutional capacity for public debt
management. The government is committed to building the capacity and powers of the public debt
management directorate at the MEF and enhancing the sustainability and transparency of public
sector debt, by publishing quarterly and annual debt reports, covering stocks, on-lending, and state
guarantees, including for most SOEs. To this end, the MEF is transitioning to a new database, which
will encompass external, domestic and on-lending to SOEs. The government’s medium-term debt
strategy centers on gradually increasing the share of external financing from 30 to 55 percent in
2025 and the share of domestic debt instruments with maturities greater than 5 years from 5 to
25 percent in 2025. As a first step, the MEF is carrying out an assessment of the capacity of
institutional investors to absorb public debt issuances.
D. Governance and Management of Public Resources
22. Fulfilling Mozambique’s long-term economic potential—and meeting the needs of

society—requires decisive actions to ensure public resources are well managed. With IMF
technical assistance, the government has strengthened its capacity to analyze fiscal risks, and
created a fiscal risk unit in the Ministry of Economy and Finance (MEF) that publishes regular reports.
The BM continues to implement the recommendations from the IMF’s 2020 Safeguards Assessment.
Governance Reform
23. Key outstanding priorities from the Diagnostic Report focus on reducing scope for
corruption and conflicts of interest in the natural resource sector.
• Reform of the public probity law. The Office of the Attorney General (Procuradoria Geral da
República) is amending 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).
• Beneficial ownership in natural resource companies. Enhancing transparency in the

management of Mozambique’s natural resources is a key commitment in the Diagnostic
Report and to the Extractive Industries Transparency Initiative. Using the definition of
beneficial ownership in the new AML law (consistent with Financial Action Task Force (FATF)
standards), new regulations of the Commercial Code require all firms to register and identify
their beneficial owners at a centralized registry (Registo das Entidades). The government will
make any legal and regulatory changes necessary to ensure that this information on
beneficial ownership is publicly accessible at the registry by end-June 2023.

• Improvement of property registries for public officials. The Ministry of Justice will strengthen
the enforcement of asset declaration rules established in a law to be submitted to the
Parliament by June 2023.
24. The government is accounting transparently for COVID-19-related public spending.

The Tribunal Administrativo (the supreme audit institution) prepared an independent audit of the
use of funds received for COVID-19 spending in 2020, with IMF technical assistance. This report
included a consolidated report and a list of recommendations on corrective measures. Based on this,
the government prepared a report assessing the findings and recommendations of the audit, which
was published together with the external audit consolidated report. These recommendations inform
the need to strengthen, in particular, the process of producing supporting documents and the
delivery of social assistance. A second independent audit is being performed to cover COVID-19
spending in 2021 and to follow-up on implementing past recommendations. Government internal
control entities are also monitoring the implementation of the recommendations, including through
an internal action plan of the MEF.
25. The BM 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 parliament by June 2024. This revised law will
strengthen BM’s mandate by explicitly stating its financial stability and macroprudential functions
and strengthen limits on monetary financing of the budget. At the same time, the legal amendments
will improve the BM’s autonomy, governance, and accountability.
26. The BM will continue to modernize its internal audit function, benchmarking its
activities in this area against best practice. A peer review External Quality Assessment was
undertaken by the Central Bank of Brazil in August 2022, evaluating conformance with the
International Professional Practices Framework (IPPF) promulgated by the Institute of Internal
Auditors. The next steps in strengthening the BM’s internal audit function include revision of core
internal audit regulation.
27. The BM will continue implementing recommendations from the 2020 Safeguards
Assessment to meet best practices in governance and transparency. The 2022 audited annual
reports are expected to be published in April 2023.
Managing Resources from Liquefied Natural Gas
28. Harnessing the potential of LNG wealth for the Mozambican people will require
reforms across several critical areas. We must ensure that we manage the country’s gas resources
well and transparently, with broad public support. The government must ensure fiscal revenues
derived from the exploitation of these natural resources are spent and invested in an efficient and
effective manner which delivers positive outcomes for Mozambique. Finally, we must ensure our
monetary and financial frameworks are sufficiently robust to avoid macroeconomic distortions and
foster the efficient allocation of capital in the economy.
29. The government is creating a sovereign wealth fund (SWF) to manage resource flows
from LNG. Following public consultation, a draft law creating an SWF has been prepared.
Investments of the SWF ‘s resources will be managed by the BM, 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
draft law includes a revenue repartition rule which divides LNG related fiscal revenues between the
SWF and the budget. The rule will be based on projected revenues rather than actual revenues
being received during the fiscal year to enable proper budget planning and to counteract volatility
in international petroleum prices. The methodology for calculating projected revenues will be
further detailed in regulations and will include a mechanism for multi-year smoothing by applying a
moving average of petroleum revenues to determine the share of revenues to be allocated to the
State Budget. The regulations, subsequent to the law will be prepared by June 2023. The rules and
conditions for using the resources in the SWF in case of emergencies will be transparent. The
government will submit the SWF law to the Parliament by end-December 2022 (structural
benchmark).
Managing Fiscal Resources
30. 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
31. The Revenue Administration (Autoridade Tributária, AT) is modernizing tax collection
through an integrated electronic tax filing system (e-tributação). E-tributação is currently used
to collect receipts from the most important tax bases, including VAT and income taxes, in all tax
offices (DAFs) and large taxpayer offices (UGCs). 2 As of end-August 2022, it covered 45 percent of
income tax collections and 100 percent of VAT and simplified tax collections. The system is now
linked with e-SISTAFE (the financial management system) resulting in an automatic classification and
faster transfer of resources to the CUT (treasury single account).
32. The AT will extend e-tributação to other taxes (tax on vehicles, tax on national
reconstruction, stamp duties (IS), property taxes (SISA), and inheritance and donation tax) by
end-2023. In addition, the AT will extend the transversal modules (fiscal execution, bankruptcies,
payments by installments, risk profiles, claims and recourse, refunds and compensations, litigation
and tax audits) by end-2023. As a result, the AT will fully implement e-tributação for all taxes and in
all tax offices by end 2023 (structural benchmark), with an objective of achieving a tax coverage of
70 percent of total tax revenue collected by the AT.
33. The AT will continue to develop a digital interface (Portal do Contribuinte) to allow all
taxpayers to file and pay all taxes electronically by end-June 2023 (structural benchmark). The
interface connects the portal do contribuente with e-tributação and is currently operational for only
2
The full list of taxes currently collected through e-tributação is as follows: Imposto sobre o Valor Acrescentado
(IVA), Imposto Simplificado para Pequenos Contribuintes (ISPC), Imposto sobre o Rendimento das Pessoas Singulares
(IRPS), Imposto sobre o Rendimento das Pessoas Colectivas (IRPC), Imposto sobre a Produção Petrolífera (IPP),
Imposto sobre a Produção Mineira (IPM), Imposto sobre a Superfície (ISS), Imposto sobre a Renda do Recurso
Mineiro (IRRM) Taxa sobre os Combustíveis (TsC).

two types of taxes, VAT and the simplified tax for small taxpayers. At end-August 2022, the Portal do
Contribuinte covered 37 percent of total taxpayers in VAT and small taxes, and 72 percent of large
taxpayers. By end of 2023, the objective is to allow all taxpayers to file and pay electronically, and
cover 60 percent of total taxpayers. In the context of COVID-19-related restrictions, the AT has
already simplified procedures for taxpayers to process payments through banks.
34. Modernizing the taxpayer registry and enhancing interoperability with other public
registries remains a key step towards achieving improved revenue collection. The AT is
cleaning and updating the taxpayer registry, removing duplicated taxpayers, and verifying the
registry for 90 of the largest 100 taxpayers, with the remining 10 to be completed by end-December
2022. The AT is also enhancing links and interoperability with other public registries, including for
the civil registry and commercial banks. Going forward, it will involve also utility companies. Work is
ongoing to create a unique identification number for individuals for civil and fiscal purposes.
35. The AT continues to reform its structure and progress in gathering and cross-checking
third-party information to increase taxpayer compliance and enforce tax arrears collection. A
reform proposal for the internal structure of the AT is expected to be approved by the Council of
Ministers by end-December 2022. A risk management committee was 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 will be integrated in the revised organizational structure of
the AT and has started using mining and gas risk assessment matrix to perform audits to extractive
companies.
36. The MEF is committed to addressing the deficiencies in the VAT refund mechanism
and to clear accumulated arrears. The VAT law expected to be submitted to the Parliament in
November 2022 limits the period for taxpayers to claim refunds to twelve months. Past this deadline,
the refund will be carried-forward and credited against future VAT liabilities. In parallel, MEF will
submit a strategy by end-June 2023 to clear the current stock of VAT refund arrears, amounting to
MTS 35.2 billion at end-June 2022. In 2022, the government is retaining 16.5 percent of the share of
VAT gross collection for the payment of refunds, which will remain at the same rate in the 2023
budget, to ensure sufficient resources are available for refunds and avoid any further accumulation
of arrears.
Public Financial Management (PFM)
37. Informed by the experience of the COVID spending and various other diagnostics, the
government’s second PFM strategy will be completed by end-June 2023. 3 Its main objective is
to guide PFM reforms in a prioritized and coordinated manner and to address new challenges,
including to strengthen budgetary execution norms pertaining to spending in an emergency
context.
3
These diagnostics include, the Fiscal Transparency Evaluation (FTE) and the Public Expenditure and Financial
Accountability, among others.

38. The government is reforming budget execution to strengthen the expenditure chain
and financial controls, to prevent the accumulation of expenditure arrears. The government is
implementing several reforms to incorporate all stages of the expenditure chain within e-SISTAFE
(the financial management system) by end-2022, to enhance budget execution control, budget
discipline and budget transparency:
• Modernization of the PFM legal framework (SISTAFE law and regulations) which is in line
with international good practice has been completed. All stages of the public procurement
process are incorporated into the e-SISTAFE system. The system is currently used to manage
procurement of goods and services by central government, representing 17.3 percent of
procured expenditure (goods and services, public investment, and works). By January 2023,
the government will commence managing all public investment procurement undertaken by
central government entities through e-SISTAFE. All central government entity procurement
will be fully managed through e-SISTAFE by June 2023.
• Establishing ex-ante quarterly commitment limits for all expenditure units from January
2023. 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. This measure will be implemented through the
applicable budget execution circular to be issued for management of the 2023 budget
(proposed modified structural benchmark for January 2023)
• The new financial programming tools have been finalized in e-SISTAFE (modulo de
programação financeira) which consists of the annual Orçamento de Tesouraria for
budgetary planning and the quarterly Plano de Tesouraria for financial programming. The
government will fully implement these tools in all spending units, by end December 2022
(structural benchmark).
39. The government is moving from a cash rationing approach to pro-active management
of cash flows and balances. With support from the IMF, the government will set-up by end-2022,
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. The MEF will
enhance the coverage and functioning of the treasury single account (Conta Única do Tesouro—
CUT), beginning with a full mapping of all public sector bank accounts by June 2023. Treasury’s cash
management will also be enhanced with support from a forecasting tool that is being developed
within e-SISTAFE.
40. The government has strengthened public investment management and will focus on
improving the climate resilience of public infrastructure investments. The revised SISTAFE law
regulation, which revokes Decree 52/2020, brings the public investment framework into the general
PFM legal framework, and requires mandatory appraisals for capital expenditures above US$30 mil-
lion. The adoption of the new electronic platform (e-SNIP 4) and the revision of the manual to assess
4
http://e-snip.mef.gov.mz/

public investment (Manual Geral de Identificação, formulação e avaliação de Projetos) enable us to

list, assess and approve investment projects. For instance, all new capital spending in the 2022 and
2023 budgets went through the assessment procedures. The government will continue to
strengthen planning and project selection over time, including by using criteria pertaining to
climate-change resilience of infrastructure projects, with World Bank support.
41. The government will continue to strengthen the oversight and management of SOEs.
The current legal framework provides for IGEPE to exercise a shareholder role and oversight over
SOEs that are directly and indirectly held by the central government. To improve the monitoring of
these SOEs, IGEPE has prepared a mapping of all existing SOEs and their subsidiaries and is
preparing consolidated 2020 accounts, to be published by December 2022, which will then be
subject to external audit. IGEPE also monitors the level of indebtedness of national SOEs, and sends
their borrowing thresholds to the MEF for the purpose of harmonization with the treasury (in
accordance with article 30, number 3 of the Decree 10/2019, February 26) at the beginning of each
fiscal year. The MEF is creating a task force to monitor the implementation and supervision of
reimbursements of on-lending agreements. The government intends to regulate municipal SOEs’
borrowing in a decree to be approved by the Council of Ministers by December 2023. 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.
42. The government will continue to strengthen fiscal transparency and fiscal risks
management. The government will continue to publish the medium-term fiscal framework
(annually), debt management reports (quarterly and annual) and the fiscal risks statements
(annually). These reports support transparent budgetary discussions, among other uses. The fiscal
risk statement already covers fiscal risks from SOEs and pensions, and coverage will be expanded to
report on PPPs in 2023.
E. Monetary and Financial Sector Reform
43. The BM 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. A new regulation for the derivatives
market was issued in April 2021. To further foster the development of price discovery, BM is in the
process of adhering to the FX Global Code by 2023.
Next Steps are as Follows:
• In monetary operations, to sharpen its monetary policy response to the state of the
economy, the BM plans to continue improving its forecasting process, including by further
refining their near-term forecasts for agricultural and non-agricultural GDP. Improvements
to the BM’s provision of liquidity to the interbank market hinge on strengthened cash flow

management by the government (¶41) and enhanced communication between government

agencies and the BM.
• Reform of the foreign exchange (FX) market. The BM is introducing policies to help
develop the FX market over the medium-term, including by fostering better price discovery
by market participants and the development of hedging instruments. The determination of
the reference exchange rate is being revised to capture actual volume-weighted market
transactions rather than quoted rates and will be operational by end-2023. A new FX
derivatives regulation permitted the resumption of derivatives transactions.
44. The BM 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 BM 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.
45. The BM is advancing in bank regulation and supervision. Drawing on the experience of
countries in the region with the implementation process, the BM is revising the prudential
regulations to allow the transition from Basel II to Basel III capital accords by end-2023. With IMF TA
support, the BM is developing the regulatory and supervisory framework for the management of
cybersecurity risks, including through on-site assessments by end-September 2023.
46. The government is addressing the findings of the Eastern and Southern Africa Anti-
Money Laundering Group mutual evaluation report and updated FATF action plan. The
government is taking significant measures to address the significant technical compliance
deficiencies and effectiveness challenges identified in the June 2021 report and the FATF’s Post
Observation Period Report. Looking ahead, measures include:
• Reforms prioritizing strengthening the framework for collecting and holding beneficial
ownership information (in line with the FATF definition of beneficial ownership).
• Implementation of the risk-based AML/CFT supervision framework started in September

2022 and the AML/CFT Service within the BM’s Prudential Supervision Department is
expected to be fully operational by end-June 2023. The supervision manual for risk-based
supervision is expected to be finalized and distributed to all supervisors by end-2022.
• The information exchange framework is being strengthened. GIFiM has signed MoUs with
several regional and international counterparts and continues strengthen its domestic and
international links. Domestic cooperation is also being enhanced—the BM signed
Memoranda of Understanding (MoU) with the FIU (GIFiM), the Gambling Control Unit
(Inspecção Geral de Jogos – IGJ) and the Insurance Supervision Institute of Mozambique
(Instituto de Supervisão de Seguros de Moçambique- ISSM). The BM cooperates with the
Attorney General’s office and law enforcement under the requirements of the Criminal
Proceeding Code and their Organic Law.

• A law addressing ML risks in non-governmental organizations has been submitted to

parliament.
• The BM will conduct an awareness program to microfinance institutions throughout the

country, which is expected to be concluded by end-2023.
47. 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-June 2023. Recommendations from the
evaluation will inform the new strategy. The BM 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 end-2023. The revised law, aligned with
international best practices, will strengthen BM powers in the national payment system, and improve
financial inclusion.
48. The crisis management framework is being strengthened. Following approval of the
regulations governing recovery and resolution planning, the BM has issued guidelines on the
implementation of resolution powers covered by the banking law. The BM is reforming the Deposit
Guarantee Fund Regulation, with technical assistance from KfW, aiming at aligning its functions with
the scope of the new resolution framework, including by revising the corporate governance
structure and the determination of the participants’ fees. The BM expects to finalize by end-2023.
49. 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
50. The authorities stand 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. --Dominant
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
51. The government is implementing improvements to national accounts statistics.

Following recommendations from IMF TA, the government is on track to produce quarterly national
accounts (QNA) by expenditure by first completing an evaluation of available data sources for
current and constant price estimates by end-2022 and publishing QNA series by expenditure by

end-2023. The government will resume publishing changes in inventories in the annual national
accounts by expenditure at constant prices by June 2023. The government will resume publishing
economic activity indicators, such as monthly industrial production and quarterly economic climate
indicators in timely fashion (data will be published with no more than a two-month lag).
52. The authorities are reconciling 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 BM and the MEF, based on TA recommendations from the IMF Statistics
department. The BM 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
53. The ultimate responsibility of program monitoring and coordination will rest with the
Ministry of Economy and Finance and Bank of Mozambique. To ensure coordinated
implementation of the program, the MEF and BM will consult with the other public institutions
involved in meeting program objectives to track progress on various targets and reforms under the
program. Similarly, the MEF will provide oversight responsibility for ensuring that public spending is
compliant with budget limits.
54. 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 2022, end-
September 2022, end-December 2022, end-March 2023, end-June 2023, and end-December 2023 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 second, third and fourth reviews will take
place on or after March 15, 2023, September 15, 2023, and March 15, 2024, respectively. To this end,
the government plans to:
• 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.
• 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 BM, and the zero ceiling on the accumulation of new public
and publicly guaranteed external payment arrears (continuous criterion).

• 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.
• The government will prepare an external borrowing plan to facilitate assessment of the QPCs
and ITs on external debt.
• In line with the transition towards inflation targeting, monetary policy aims to achieve an
annual headline inflation rate centered on the program objective of 12.5 percent at end-
September 2022, and 15.0 percent at end-December 2022, with a symmetric band of
±3 percent around the objective; 14.0 percent at end-March 2023, 11.5 percent at end-June
2023, 10.5 percent at end-September 2023, 9 percent at end-December 2023, 8.5 percent at
end-March 2024, 7.5 percent at end-June and end-September 2024, 6.5 percent at end-
December 2024, and 6.0 percent at end-March 2025, with a symmetric band of ±2 percent. If
inflation goes beyond the specified bands at the program test dates, we 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 BM plans to undertake.
• 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
modify import restrictions for balance of payments purposes; and
• Adopt any new financial or structural measures that may be necessary for the success of its
policies, in consultation with the IMF.
55. The government estimate 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 from the World Bank.
56. 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.
57. 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 Arrangement
(Billions of meticais, unless otherwise indicated)
End-Sept 2022 End-Dec 2022 End-Mar 2023 End-June 2023 End-Sept 2023 End-Dec 2023
IT Prop. rev. IT QPC Prop. rev. QPC IT Prop. rev. IT Prop. QPC Prop. IT Prop. QPC
Performance Criteria
1/
Floor on domestic primary budget balance -2.0 2.7 1.6 5.3 2.0 7.5
2/
Ceiling on new non-concessional external debt contracted or guaranteed by the public sector 0 0 0 0 0 0
Floor on the stock of net international reserves of the BM (US$ millions) 2000 2000 2200 2200 2200 2200
Ceiling on the accumulation of new public and publicly-guaranteed external payment arrears.
3/ 0 0 0 0 0 0
(US$ million)
MPCC 4/5/
Inflation (upper-band, percent) 10.0 15.5 10.0 18.0 8.0 16.0 13.5 12.5 11.0
Inflation (mid-point, percent) 7.0 12.5 7.0 15.0 6.0 14.0 11.5 10.5 9.0
Inflation (lower-band, percent) 4.0 9.5 4.0 12.0 4.0 12.0 9.5 8.5 7.0
Indicative Targets IT IT IT IT IT IT
6/
Present value of new external debt (US$ million) 217 294 86 215 320 436
7/
Ceiling on domestic debt stock 257 270 278 320 328 350
8/
Floor on social spending 3.8 5.8 1.7 3.4 5.1 6.8
Memo item:
External concessional borrowing 26.6 35.4
Budget grants (US$ million) 52.6 349.6 0.0 0.0 0.0 150.0
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/
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 Due Dates
Prior actions Macroeconomic objectives Dates

Submit to parliament an amended VAT law to implement the elimination of VAT
Enhance revenue
exemptions and zero-ratings to ensure the reform is effective starting on January
mobilization.
1st, 2023
Structural Benchmarks
Submit to Parliament an amended AML/CFT law updating the legal framework
including to bring the definition of beneficial ownership in line with the FATF
Met, End-June 2022
AML/CFT international standard and strengthen the framework for
implementation of targeted financial sanctions.
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 Improve governance and Proposed change from
Governance and
conflict of interest; (iii) require submission of declarations of financial interests by strengthen efficiency of end-December 2022 to
Anti-Corruption
new public servants upon hiring; (iv) establish published procedures for reporting public spending. End-June 2023
conflicts of interest.
Improve governance,
strengthen revenue
LNG Revenue mobilization and efficiency of
Submit to Parliament the law on the Sovereign Wealth Fund on LNG resources. End - Dec 2022
Management public spending, and optimize
budgetary use of resource
revenue.
Fully implement the elimination of VAT exemptions and zero-ratings identified Enhance revenue
Jan. 1 2023
through the 2022 prior action mobilization.
Include in the 2023 budget document and all implementing documents the
public service hiring limit of one out of three leaving employees except in the End-December 2022
sectors of education, health, justice administration and agriculture.
Reduce public debt through
fiscal consolidation.
Include in the 2024 budget document and all implementing documents the
public service hiring limit of one out of three leaving employees except in the End-December 2023
sectors of education, health, justice administration and agriculture.
Fiscal Extend the implementation of the new e-tax system (including filing electronic tax
End - Dec 2023
returns and payments) to all taxes and tax administration offices. Enhance revenue
Implement the digital interface (Portal do contribuinte) to allow all taxpayers to mobilization.
End - Jun 2023
file and pay all taxes electronically.
Establish the quarterly Treasury Budget which will determine limits on quarterly
Proposed change from
commitments to be operationalized, and eliminate ex-ante weekly commitment
end-December 2022 to
limits in the budget law for 2023 and in the corresponding budget execution
end-January, 2023
decree circular.
Fully implement in all spending units e-SISTAFE tools for budgetary planning
End - Dec 2022
(annual) and for financial programming (quarterly).
Sources: Mozambican authorities; and IMF staff.

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
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.
• 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.
Text Table 1. Baseline Projection of Selected Variables

(In Million of US dollars; Cumulative on an annual basis)
End-Jun. End-Sep. End-Dec End-Mar End-Jun. End-Sep. End-Dec.
2022 2022 2022 2022 2023 2023 2023
Budget Grants and loans 52.6 52.6 351.6 0 0 0 150
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.
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 2.

Text Table 2. 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 Reserve

https://www.federalreserve.gov/releases/h10/current/default.htm.
https://www.imf.org/external/np/fin/data/rms_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, 2021, that

result in more favorable terms to the guarantor than those of the initial debt, will be excluded from
the ceiling. 1
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, created
1
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 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.
1
The latter is a change from the time of program approval.
21Guidelines on
Public Debt Conditionality in IMF-Supported Programs.

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 below zero, the PV will be set
2
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 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
32Thecalculation of concessionality takes into account all aspects of the debt agreement, including maturity, grace
period, payment schedule, upfront commissions, and management fees.

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 2).
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.
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. 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 INAS4 from the
3
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 spending (rather than
allocation). The monitoring of this IT will be made through the table on quarterly spending provided
by the MEF (see below).
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 inflation falls
outside the:
• ±3 percentage point range around the 12.5 percent mid-point target band value for end-
September 2022, or 15.0 percent for end-December 2022,
43Instituto
Nacional de Acçao Social.

March 2023, 11.5 percent for end-June 2023, 10.5 percent for end-September 2023, or 9 percent for
end-December 2023,
March 2024, 7.5 percent for end-June or end-September 2024, or 6.5 percent for end-December
2024,
March 2025.
J. Structural Benchmarks and Prior Actions
30. Prior Actions are specified in Table 2 of the MEFP.
• Make the necessary legal changes to implement the elimination of VAT exemptions and
zero-ratings to ensure the reform is effective starting on January 1st, 2023
31. 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.

Summary of Data to be Reported
Data Provider Periodicity and Target Date
1. 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
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, 50 days after the
Bills and Bonds, debt from the central bank and other end of the quarter
domestic debt “outros”.
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
Securities Included in Official Reserve Assets FC month
Repos Nonresidents Included in Official Reserve Assets FC month

Data Provider Periodicity and Target Date
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
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.
ENH/MEF Quarterly. Within 20 days
Interest accumulated. after the end of the quarter.

Data Provider Periodicity and Target

Date
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.

Statement by Mr. Willie Nakunyada, Mr. Adriano Isaias Ubisse, and Mr. Jorge Essuvi
on Republic of Mozambique Executive Board Meeting
November 21, 2022
Introduction
1. Our Mozambican authorities appreciate the constructive dialogue with the Fund staff
during the first ECF review mission. They broadly share the staff’s assessment of policy
priorities and challenges.
2. The economy of Mozambique is gathering recovery momentum following the lifting of

pandemic restrictions. Despite a difficult domestic and external environment
compounded by overlapping shocks including recurrent climate disasters, the authorities
have remained steadfast in implementing reforms to keep the Extended Credit Facility
(ECF) arrangement firmly on track. They remain committed to the reform agenda
anchored by sustained fiscal consolidation and structural reforms—including
strengthening governance to reduce corruption vulnerabilities—to bolster inclusive and
sustainable growth. They have also made progress in strengthening policy and
institutional settings to achieve durable macroeconomic stability, enhance productivity
growth and strengthen governance. Considering the uncertainties dominating the outlook,
the authorities have recalibrated macro-economic policies under the Pacote de
Aceleração Económica (PAE) to address immediate socioeconomic challenges while
enhancing resilience to future shocks.
3. The authorities have intensified their fight against terrorism alongside regional partners,
to restore peace, ensure national cohesion, and unleash the country’s enormous growth
potential. As such, they view the ECF arrangement as instrumental to support their
reform agenda to realize the key objectives of the country’s Five-Year Government
Program 2020–2024 designed to tackle growth and development challenges. In this
regard, they continue to pursue economic reforms aimed to safeguard macroeconomic
stability, consolidate public finances, reduce poverty and social inequalities, while
creating a conducive environment for private sector development and job creation.
2
Program Performance
4. All quantitative performance criteria (QPCs) were met, some with large margins. This
include the QPC on the floor of the primary budget balance; the QPC on the floor of net
international reserves; the ceiling on new non-concessional external debt contracted or
guaranteed by the public sector; and the ceiling on the accumulation of new public and
publicly guaranteed external payment arrears.
5. The Monetary Policy Consultation Clause (MPCC) was marginally breached as inflation
increased to 10.8 percent at end-June 2022, compared to the upper bound of 10 percent.
This slight breach was attributed to higher international fuel and food prices, as well as
domestic factors related to adverse weather events that affected agriculture output and
prices. To address the inflationary pressures, the Banco de Moçambique (BM) continue
to tighten its monetary policy and stands ready to further tighten conditions as needed.
The authorities are, therefore, requesting the modification of the monetary policy
consultation clause based on the projected inflation for the rest of the program.
6. The indicative target on the floor on social spending was met by a large margin and the
ceiling on the stock of domestic debt was also met. On structural benchmarks (SBs),
Parliament passed the amendments to the AML/CFT law in May 2022. Significant
progress has also been made on the forward-looking SBs, including the revision of the
public probity law and the law to establish the Sovereign Wealth Fund. Considering the
strong performance under the ECF arrangement amidst challenging conditions, the
authorities seek Executive Directors’ support in completing the first review under
the ECF program and associated requests.
Recent Economic Developments and Outlook
7. GDP growth is projected to expand from 2.3 percent in 2021 to 3.8 percent in 2022,
reflecting a rebound in aggregate demand experienced in the first half of 2022, including
increased activity in mining and services sectors. Looking ahead, LNG production that
saw the first shipment in November 2022, is expected to accelerate growth to 5.0 percent
in 2023. Nevertheless, the medium-term outlook remains subject to downside risks
including from the slowdown in advanced economies and emerging markets, tightening
global financial conditions and volatile commodity prices. Additionally, climate shocks,
as well as delays in the implementation of the LNG megaprojects, could compound
downside risks. On the upside, should the LNG megaprojects materialize as planned,
expanded production combined with strong structural reform efforts will have a
significant impact on output. Consequently, overall growth is projected to average
6.1 percent over the period 2023–2025.
8. Inflation accelerated sharply in 2022, reaching 12.1 percent year-on-year in September,

due to rising food and energy import costs. As a result, the current account deficit
widened significantly on the back of higher imports of equipment to support LNG
developments. Notwithstanding higher fuel prices, international reserves are projected to
3
remain comfortable at medium-term levels of 4 months of non-megaproject imports,

buoyed by rising gas export earnings.
Fiscal Policy and Debt Management
9. The government remains committed to fiscal consolidation efforts to reduce public debt
vulnerabilities while creating fiscal space for priority investment in human capital and
climate resilient infrastructure. To support these investments, they plan to build a robust
and fair revenue collection mechanism that does not depend on volatile commodity
revenues. As such, they are reforming the current VAT regime by eliminating some
exemptions and domestic zero-ratings. To minimize the impact on the most vulnerable
households, exemptions, and zero-ratings on basic items, for the agricultural and
renewables sectors will be maintained in line with government development priorities.
Further VAT reforms include the reduction of the tax rate from 17 percent to 16 percent
to align with the regional benchmark and safeguard competitiveness. Moreover, they will
shorten the window during which VAT refunds can be claimed to reduce VAT
reimbursement arrears.
10. The authorities continue their efforts to improve the efficiency of tax administration by
modernizing the taxpayer registry. In this context, they are enhancing interoperability
with other public registries towards achieving improved revenue collection. The Tax
Administration is also enhancing links and interoperability with other public registries,
including for the civil registry and commercial banks. In addition, the Tax Administration
continues its modernization project to collect tax through an integrated electronic tax
filing system (e-taxation). The e-taxation is currently being used to collect receipts from
the most important tax categories, including VAT and income taxes, in all tax offices and
large taxpayer offices.
11. Reform efforts are also being directed towards implementing a set of measures to
enhance public expenditure efficiency. In this vein the authorities are limiting new hire of
public servants except in education, health, agriculture sectors and the judiciary system.
Reforming the wage bill is a key element of the fiscal adjustment efforts. In October 2022
the Parliament concluded the necessary amendments to the public wage bill legislation
which allow the government to implement measures to better manage the cost of public
sector employment and limit the wage bill below 12 percent of GDP in the medium-term.
Ultimately, they plan to unify pay scales and supplementary wage components across the
public sector into a unique scheme applicable to all public sector employees. The new
legislation will also allow only one replacement out of three leaving (retiring) civil
servants going forward. This is consistent with the objective of streamlining the size of
the civil service in the medium-to-long term.
12. Government remains committed to strengthening the debt management framework and
improving the quality and transparency of debt statistics within the debt management
strategy. In this context, the debt strategy will focus on (i) prioritizing multilateral and
bilateral credits with more favorable conditions (ii) mapping and continued monitoring of
SOEs to reduce the state exposure to guaranteed debt and (iii) debt restructuring,
especially with non-Paris Club creditors. Benefitting from capacity development from the
4
World Bank and IMF, the authorities are improving regular reporting of debt. They are
also enhancing the sustainability and transparency of the public sector debt by setting
clear, entity-specific debt limits approved by the Council of Ministers, and by publishing
detailed quarterly public sector debt reports, containing stock levels, intra-agency on-
lending, and state guarantees.
Monetary, Exchange Rate and Financial Sector Policies
13. The Bank of Mozambique (BM) remains committed to tightening of monetary conditions
to bring inflation back to target. As such, since January 2021, the BM has cumulatively
increased the policy rate by 700 basis points in response to raising inflationary pressures
and stands ready to further tighten monetary policy in a transparent and clearly
communicated manner. In this regard, the BM will continue to implement a cautious
monetary tightening while refining its framework to implement a forward-looking
monetary policy framework based on a policy interest rate (MIMO) to signal the stance
of the policy and to achieve the objective of a single-digit inflation in the medium term.
14. The BM will continue to allow for exchange rate flexibility as a shock absorber while
making strategic interventions to smoothen disorderly market conditions. In this regard,
the ongoing reforms being developed in the FX market are expected to improve
transparency while fostering better price discovery by market participants. The
determination of the reference exchange rate is being revised to capture actual volume-
weighted market transactions rather than quoted rates. Furthermore, Parliament
concluded the approval of the new FX law which will allow the authorities to continue
gradual removal of restrictions on international capital and financial account transactions
to promote a business-friendly environment.
15. The banking sector is well capitalized, liquid, and positioned to absorb credit losses and a
liquidity squeeze if the crisis is short-lived. Going forward, the BM will continue
implementing prudential rules to support the safety and soundness of banks and ensure
adherence to loan classification and provisioning standards. Meanwhile, the BM is
revising the prudential regulations to allow the transition from Basel II to Basel III capital
accords by end-2023. With IMF technical support, the central bank is also developing the
regulatory and supervisory framework for the management of cybersecurity risks.
16. Financial inclusion continues to rank high on the authorities’ priorities under the 2016–
2022 National Financial Inclusion Strategy. In this connection, Parliament approved, in
October 2022, the Basic Account Law that simplifies the requirements and reduce the
costs of opening bank accounts for low-income households. Moreover, the
interoperability among the mobile payments’ providers has allowed for more flexibility
in the settlement of transactions. The government is also implementing a set of initiatives
to improve the feasibility, transparency and security of the national payments system that
will be strengthened by the reform of the payment system law.
5
Governance and Structural Reforms
17. Leveraging Fund capacity development (CD), the supreme Audit Tribunal prepared an
independent audit of the use of funds received for COVID-19 spending in 2020. The
report identified several shortcomings in procurement and spending execution, with the
later related to the limited capacity imposed by the emergence situation and supply chain
disruptions. However, the Attorney General’s Office opened investigations linked to
possible criminal violations. Based on the recommendations of the report, the
government is implementing remedial measures, including introducing appropriate
legislative amendments.
18. Progress has been made in strengthening the AML/CFT framework, including the
approval by the Council of Ministers of the strategy against money laundering and the
financing of terrorism and the amendments to the legislation that introduced the
beneficial ownership regime. Nonetheless, the country has been placed on the FATF
Grey List. That said, the authorities are committed to fully implement additional
measures necessary to further improve the remaining AML/CFT shortcomings. In this
regard, they started to implement the risk-based supervision framework and the
AML/CFT Service within the BM’s Prudential Supervision Department that is expected
to be fully operational by end-June 2023. This process will be finalized with the
introduction of a manual for risk-based supervision.
19. As part of the preparations for the effective management of natural gas revenues, the
authorities are considering adopting a fiscal rule to mitigate risks stemming from
commodity price volatility. That said, they are establishing a sovereign wealth fund
(SWF) to manage resource flows from LNG. Following public consultation, a draft law
creating the SWF is being prepared by the Government for submission to the National
Assembly by end-2022. Investments of the SWF ‘s resources will be managed by
observing the highest standards of accountability and transparency.
Conclusion
20. The authorities appreciate Fund engagement and technical support and remain
determined to implement appropriate fiscal and monetary policies as well as structural
reforms to set the economy on a higher growth trajectory. To this end, they remain
optimistic that Fund support under the ECF arrangement will help in the implementation
of sound macroeconomic policies that deliver short to medium-term payoffs. They look
forward to the Executive Directors’ support in the completion of the first review under
the ECF arrangement.

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IMF Country Report No.

THE REPUBLIC OF MOZAMBIQUE

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

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

Copies of this report are available to the public from

International Monetary Fund • Publication Services

International Monetary Fund

© 2022 International Monetary Fund

IMF Executive Board Concludes the First Review under the

“The economic recovery is strengthening, supported by a successful COVID vaccination

2019 2020 2021 2022 2023

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

2 INTERNATIONAL MONETARY FUND

PROGRAM PERFORMANCE _____________________________________________________________________________ 5

RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK_____________________________________________ 6

POLICY DISCUSSIONS __________________________________________________________________________________10

PROGRAM MODALITIES AND OTHER ISSUES ______________________________________________________17

INTERNATIONAL MONETARY FUND 3

4 INTERNATIONAL MONETARY FUND

2. The authorities’ proactive approach to vaccination contributed to low and stable

INTERNATIONAL MONETARY FUND 5

Text Table 1. Quantitative Program Performance at End-June 2022

RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK

6 INTERNATIONAL MONETARY FUND

Text Table 2. Medium-Term Macroeconomic Framework, 2022-2027

2022 2023 2024 2025 2026 2027

(Annual percentage change)

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

6. Annual inflation reached 12 percent in August, remaining at that level in September.

INTERNATIONAL MONETARY FUND 7

Text Figure 2. Inflation and Related Developments

CPI and Commodity Prices

Inflation: Mozambique vs SSA

8 INTERNATIONAL MONETARY FUND

Box 1. The Fuel Price Setting Mechanism

10. Budget financing needs are covered

Financing) of US$300 million in July 2022. The

EU is expected to disburse a budget grant of

US$50 million this year. Projected net -1000.0

domestic financing in 2022 is broadly -2000.0

unchanged from 2021 at 3.8 percent of GDP. -3000.0

Reliance on short-term T-bills has increased -4000.0

(to net issuance of 1.9 percent of GDP from -5000.0

1.3 in 2021). Use of US$163 million of the -6000.0

2021 SDR allocation reduced pressure on the -7000.0

debt market and interest costs, with limited

Imports - Megaprojects Imports - Non-Megaprojects

net issuance of longer-term bonds; use of a

INTERNATIONAL MONETARY FUND 9

A. Fiscal Policy and Structural Reforms

10 INTERNATIONAL MONETARY FUND

Text Table 3. Mozambique: Government Finance, 2022-23

2022 2022 2023 2023

Total revenue 25.0 25.7 25.4 25.9

Total expenditure and net lending 32.4 33.2 31.8 33.3

Net lending 0.4 0.4 0.4 0.4

Sources: Authorities and IMF staff projections.

16. VAT and wage bill reforms are proceeding.

INTERNATIONAL MONETARY FUND 11

• Reform of public employment and compensation. As planned, the authorities are