Maputo – The International Monetary Fund has cut its 2016 growth forecast for Mozambique by nearly half on Tuesday, saying it would require fiscal policy adjustments to attract financial assistance and a recovery
programme.
The Fund and other donors suspended aid earlier this year after the emergence of loans that were not approved by parliament or disclosed publicly and which the IMF said on Tuesday amounted to 1.4 billion dollars.
In a statement after aid talks with government officials on Tuesday, the lender said it now expected economic growth of 3.4 per cent compared with the 6.6 per cent forecast in June.
“The outlook remains challenging,” it said, adding that total public debt, mostly denominated in foreign currency, had increased to “distressed levels” in 2016 owing to the addition of the previously undisclosed loans.
“While good progress was achieved on a number of technical questions, additional policy adjustments are required to further consolidate macroeconomic and financial stability, and pave the way for a Fund-supported programme,” it added.
A medium-term budget-plan for the next three years, posted on the finance ministry website, slashed the Mozambican government’s own growth estimate for this year to 3.9 per cent this year from 4.5 per cent.
The government cited the impact of drought, high levels of public indebtedness and exchange rate shocks.
The document said the budget deficit, projected at 11 per cent of GDP for this year, would narrow to 8.2 per cent by 2019.