The Executive Board of the International Monetary Fund (IMF) on Monday approved a loan to Mozambique of 22.36 million Special Drawing Rights (SDRs - equivalent to 16.6 million US dollars).
According to an IMF press release, this is "a three year arrangement under the Poverty Reduction and Growth Facility (PRGF) to support the government's economic programme into 2006".
This loan is to be confirmed when the World Bank's Executive Board reviews progress in Mozambique's poverty reduction strategy. That meeting is scheduled for 6 July, and, assuming that the Bank gives its go-ahead, the first instalment of the IMF loan (1.62 million SDRs) will become available.
The PRGF is the soft loans facility the IMF has set up for poor countries. Such loans are charged interest of 0.5 per cent, and have a repayment period of 10 years, with a five and a half year grace period.
After the Board's decision, the IMF Deputy Managing Director, Takatoshi Kato, declared that Mozambique's economic performance "was broadly satisfactory in 2003 and the first half of 2004. Real GDP growth remained strong, and the external position further strengthened".
Citing the latest household survey from Mozambique's National Statistics Institute (INE), Kato said "significant progress" had been made in poverty reduction, with the number of people below the poverty line falling from almost 70 per cent of the population in 196 to 54 per cent in 2002.
The IMF is continuing to insist on a low wage policy, and "continued fiscal consolidation".
"Achievement of fiscal targets, while allowing for additional resources for the priority sectors, will require strict control over the wage bill and restraint in non-essential outlays, as well as further efforts to strengthen revenue and improve public expenditure management", said Kato.
Put in simpler language - keep wages low, and raise more in taxation.
Kato added that "vigorous implementation of the reforms envisaged in the (government) programme to lower the cost of doing business, ease labour rigidities, and strengthen governance and the judicial system will be key to encouraging private sector development, sustaining strong growth, and further reducing poverty".
"Easing labour rigidities" is IMF-speak for making it easier to sack workers. It is doubtful whether such workers would be convinced that their poverty was being reduced.
Summarising the latest economic developments, the IMF puts real GDP growth in 2003 at 7.1 per cent (which is almost exactly what the then Prime Minister Pascoal Mocumbi estimated growth would be when he addressed the country's parliament in December).
The IMF expects growth to rise to 8.4 per cent this year, and then slow to 6.8 per cent in 2005 and 6.5 per cent in 2006 - figures that are still almost three times as high as the population growth rate.
Nominal GDP, according to the IMF's figures, rose from 3.6 billion dollars in 2002 to 4.3 billion in 2003, and is expected to reach 5.2 billion this year, and 6.2 billion in 2006.
Merchandise exports rose by 29.6 per cent in 2003, doubtless as a result of doubling the capacity of the MOZAL aluminium smelter on the outskirts of Maputo. This year, an even larger increase, of 42.8 per cent is predicted. This will be because 2004 is the first full year in which MOZAL is producing at full capacity of half a million tonnes of aluminium ingots a year, and also because of the export of natural gas to South Africa.
The rise in exports is expected to slip to a modest 4.3 per cent in 2005 and 2.3 per cent in 2006 - largely because no mega- projects are expected to come on line in those years.
As for Mozambique's debt position, the IMF puts the total outstanding public foreign debt at 84.8 per cent of export of goods and services this year.
But servicing this debt has fallen very significantly. After the two phases of the HIPC (Heavily Indebted Poor Countries) debt relief initiative, plus further bilateral debt cancellation, Mozambique's debt servicing in 2003 was equivalent to 4.5 per cent of exports of goods and services. This is likely to rise to 4.8 per cent this year, before falling back to 4.5 per cent in 2005.
Inflation, however, at 13.8 per cent last year was much higher than government targets. The IMF blames this on the strengthening of the South African rand, since so many of Mozambique's imports (including much of the food consumed in the south of the country) come from South Africa.
The Mozambican currency, the metical, remained remarkably stable against the US dollar throughout 2003, but lost about a third of its value against the rand.
Fonte: AIM
