Republic of Mozambique: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility, Requests for Modification of the Monetary Policy Consultation Clause, Waiver of Nonobservance of Quantitative Performance Criterion, Financing As

This paper focuses on Republic of Mozambique’s Third Review under the Three-Year Arrangement under the Extended Credit Facility (ECF), Requests for Modification of the Monetary Policy Consultation Clause, Waiver of Nonobservance of Quantitative Performance Criterion, and Financing Assurances Review. The three-year ECF arrangement aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while fostering higher and more inclusive growth through structural reforms. Program performance has been satisfactory. Parliamentary approval of the Sovereign Wealth Fund bill in December 2023 was an important step toward ensuring transparent and sound management of natural resource wealth. Continued fiscal consolidation is important to reduce domestic financing needs and contain public debt vulnerabilities. With inflation expectations well-anchored, ongoing fiscal consolidation, and weak nonmining growth, a gradual easing of monetary policy is warranted. Sustained efforts to strengthen institutions and governance are important to limit corruption vulnerabilities and promote private sector development. Modifications to some performance criteria for the fourth review are being proposed, in response to capacity constraints and lengthy legislative processes.