“The rationalization of the wage bill and structural restrictions to ensure lasting consolidation of the public sector’s size, debt management, restrictive financing conditions in the current conjuncture, and a structural problem in the country, namely weak governance,” are among the challenges and negotiation points between the Mozambican government and the International Monetary Fund (IMF).
“I’m not part of the Fund’s technical team negotiating with the authorities, but these are things that will be considered in the negotiations,” said Thibault Lemaire.
In an interview at the end of the Spring Meetings of the World Bank and IMF, which concluded on Saturday in Washington, the economist emphasized that the program is not yet agreed upon, it is just a negotiation. He explained that these new talks arise after the post-electoral violence of the last quarter of the previous year and the government’s request for a new program.
“Within the context of the new 20-year development strategy and the five-year governmental strategy, the authorities requested a new program on April 17 to better align the IMF’s program with the new government’s priorities and vision,” stated Thibault Lemaire.
The main objectives of the new program, which does not yet have a defined financial package, are “to support the authorities in achieving macroeconomic stability to reduce debt vulnerabilities through fiscal consolidation and structural reforms and to ensure sustainable inclusive growth while safeguarding social expenditures,” the economist said in the interview.
On April 18, the IMF announced that it had agreed with the government not to continue with the Extended Credit Facility (ECF), whose targets the country failed to meet in the last quarter of the year due to the violence in the country.
The ECF program was approved in May 2022 and foresees a total financing of $456 million (416.2 million euros) to Mozambique, with four tranches already released.
In early March, the IMF argued that Mozambique needs fiscal consolidation by 2025 to ensure the sustainability of public accounts, given the significant budget slippage recorded in the previous year.
In addition to significant budget slippages, Mozambique experienced nearly five months of social tension, featuring intense demonstrations initially contesting the electoral results of October 9, called by former presidential candidate Venâncio Mondlane.
Almost 400 people lost their lives in clashes with the police, according to civil society organizations, also leading to looting and destruction of businesses and public and private infrastructure.
The Mozambican government previously confirmed at least 80 deaths, along with the destruction of 1,677 commercial establishments, 177 schools, and 23 healthcare units during the demonstrations.
On March 23, Mondlane and the President of Mozambique, Daniel Chapo, met for the first time and committed to ending post-electoral violence in the country, although currently, criticism and mutual accusations continue in the public statements of both politicians.
