The PRGF agreement, reached in 2004, was for a loan of 11.36 million Special Drawing Rights (about 17.1 million US dollars), disbursed in six instalments. The positive outcome of the review allows for the release of the final tranche of 2.4 million dollars.
No further loan is immediately on offer or requested - instead the IMF has agreed to support Mozambique's poverty reduction programme through a three-year Policy Support Instrument (PSI).
According to an IMF release, the PSI will support economic reform in Mozambique while helping to maintain macroeconomic stability as foreign aid is increased. The assistance will be designed to complement the government's Action Plan for the Reduction of Absolute Poverty (PARPA II).
The PSI is not a loan arrangement, but takes the form of policy "advice", and represents an endorsement by the IMF of the recipient country's economic policies.
It is argued that this sends a positive signal to donors and markets. The IMF claims that this is "based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PSI-supported programs are consistent with a comprehensive framework for macroeconomic, structural and social policies to foster growth and reduce poverty".
However, critics have argued that the macro-economic and structural conditionality attached to these instruments is a continuation of IMF interference in national policy making.
The London-based NGO, the Bretton Woods Project, which monitors the behaviour of the IMF and the World Bank, points out that the PSI for Nigeria demanded further privatisation as one of its conditions.
The PSI is enforced by the IMF through six-monthly assessments, and if a country fails two of these consecutively the PSI is automatically terminated. Countries that already have a PSI include Nigeria, Uganda, and Cape Verde.
According to the Deputy Managing Director of the IMF, Takatoshi Kato, "the Mozambican authorities are to be commended on the recent impressive macroeconomic performance and overall satisfactory program performance" "The economy has been resilient to numerous exogenous shocks and the outlook for 2007 and medium-term is favourable". he declared. "The authorities' graduation to a PSI sends a strong signal to donors and private investors regarding the favourable economic environment".
As usual, this gushing praise is larded with a series of IMF demands. Kato wanted the Mozambican government to speed up yet more economic reforms, claiming that what is needed is a "strengthening of fiscal policy and reducing the cost of doing business and continuing to squarely address governance issues".
Kato praised the new tax regimes for mining and for oil exploration, approved by the Mozambican parliament, the Assembly of the Republic, last month, and urged the government "to adopt new model contracts in the mining and petroleum sectors".
Kato claimed that the public sector reform program "is at a critical juncture", but added that "the installation of a clean integrated payroll database based on a civil service census is an important first step" He also wanted the government to "clarify" its decentralisation strategy, in order "to address concerns about the accountability and transparency of district spending".
This is clearly a reference to the government's decision, in 2006, to allocate seven million meticais (about 280,000 US dollars) a year to each of the 128 rural districts for local development purposes.
SOURCE: AIM
