On Monday, the IMF Executive Board approved a Policy Support Instrument (PSI) for Mozambique, intended to maintain the country's macro-economic stability.
Fischer said that Mozambique requires "a second wave of economic reforms" to be monitored under the three year PSI, and key to these were "a strengthening of fiscal policy, reducing the cost of doing business and continuing to squarely address governance issues".
Fischer approved of the new tax regimes for the mining and oil sectors, approved by the Mozambican parliament, the Assembly of the Republix, in May. These allow certain tax exemptions, but limit them in time and scope, and he regarded these as possible examples for tax regimes in other sectors.
Fischer admitted that in the past investors had demanded generous tax exemptions - otherwise they would not have put their money in Mozambique at all.
Such exemptions were correct at the time, he believed, because they sent the right signals and attracted investors to a country that was just emerging from a devastating war.
"Now it's different", said Fischer. "There have been many years of high economic growth and inflation is under ten percent.
Many investors are interested in Mozambique, and so the government has more cards in its hand than it used to have".
"The challenge now is to attract investment, while ensuring that the country gets the maximum benefit", he said. He thought there would be no justification for future large-scale industries being granted the same favourable tax regime offered to the MOZAL aluminium smelter in the late 1990s.
As for "reducing the cost of doing business", Fischer fell back on the spurious figures from the latest issue of the World Bank's shoddy "Doing Business" reports.
If one were to believe the World Bank data, drawn entirely from anonymous sources, it would seem that the business environment in Mozambique is deteriorating - which even those business figures most critical of the government do not claim.
Fischer alleged that reforms take 12 months to be reflected in the World Bank reports, but refused to be drawn further on the issue, saying that any complaints about the World Bank's reports should be addressed to the Bank itself. He did admit that the indicators in the Bank's "Doing Business" reports were "relative".
Fischer made clear that the reference to "governance issues" essentially means that "the government's anti-corruption strategy must be implemented".
"Economic agents are expecting more tangible results from that strategy", he said. "They want more cases investigated. They want guidelines against conflicts of interest".
The IMF release after the Monday board meeting also mentioned "concerns about the accountability and transparency of district spending".
Fischer said this did not mean that the IMF opposed the government's initiative, begun in 2006, to grant seven millon meticais a year to each of the 128 districts for local development.
That sum was less than one per cent of public expenditure, he added, "and in fact, we think it's a good idea to start with a relatively small sum".
But he feared that "if not done properly, decentralisation can lead to a loss of control of fiscal policy".
If increasing amounts of spending were to be decentralised to the districts that would require programmes to train more staff.
"There must be a well-defined framework of who does what, what is to be done at central, provincial and district levels", he said, "What are the rules on the transfer of public funds ?
This has to be well thought out before taking action".
The Monday IMF board meeting also completed the sixth and final review of Mozambique's economic performance under a Poverty Reduction and Growth Facility (PRGF) arrangement dating back to 2004.
Since the review was positive, the IMF released the final 2.4 million dollar tranche of the 17.1 million dollar PRGF loan.
Mozambique has now "graduated" from the PRGF club to the more exclusive group of counties whose performance the IMF minitors through a PSI, which does not involve any further loans.
SOURCE: AIM
