Macroeconomic policy commended by IMF,

Mozambique is set to benefit from a US $11.8 million disbursement from the International Monetary Fund (IMF), following a positive review of that country's economic performance under the IMF's Poverty Reduction and Growth Facility (PRGF). "In completing the review, the board [of the IMF] ... concluded that Mozambique's progress report on implementation of its poverty reduction strategy provided a sound basis for IMF concessional financial assistance," an IMF statement said. The PRGF is the successor to the IMF's structural adjustment programme, and its most concessional facility for low-income countries. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years, "with a five and a half year grace period on principal payments," the IMF explained. "It is intended that PRGF-supported programmes will, in time, be 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 PRGF-supported programmes are consistent with a comprehensive framework for macroeconomic, structural and social policies to foster growth and reduce poverty," the fund said. IMF deputy managing director and acting chairman, Shigemitsu Sugisaki, commended the Mozambican authorities for their "continued satisfactory performance under their PRGF-supported programme". "Real GDP growth has remained strong; the official reserves position has strengthened; inflation declined markedly in 2002; and encouraging progress was made towards meeting the government's poverty reduction objectives in the areas of health and education," Sugisaki was quoted as saying. The IMF's executive board welcomed measures the authorities had taken to strengthen government revenue, including the adoption of new tax codes and an increase in fuel taxes. "The recent establishment of a poverty observatory [which collects data relating to poverty] is an important step toward facilitating a greater involvement of stakeholders in the PRSP process," Sugisaki added. He noted that the government's programme for 2003 seeks to sustain rapid growth by "maintaining prudent macroeconomic policies and deepening structural reforms". "To contain the primary fiscal deficit at the 2002 level will require a close monitoring of the government's wage bill and restraint in other non-priority outlays, as well as continued efforts to strengthen tax administration and improve public expenditure management. The authorities are also moving ahead with a comprehensive reform of the public sector to increase its efficiency and ensure an adequate allocation of resources to the social sectors over the medium term," Sugisaki noted. The Bank of Mozambique would maintain a "sufficiently tight" monetary policy to "correct the recent rise in inflation owing to exogenous factors, and to consolidate the gains towards price stability". Intervention in the forex market would be limited, however. "The authorities are firmly committed to strengthening the banking system and fostering a healthy competitive environment. Their decision to conduct diagnostic reviews of the main banks, based on international accounting standards, is an important step in this regard. Sustained efforts in this area, further progress on fiscal and public sector reforms, and improvements in governance and the judicial system will be key to stimulating private sector development and ensuring strong growth and poverty reduction," said Sugisaki. The IMF explained that Mozambique's economic programme was originally supported by a three-year concessional loan arrangement for about US $82.8 million, in 1999, through the IMF's structural adjustment facility. In March 2000, that commitment was increased to about US $122.91. So far, Mozambique has drawn about US $99.2 million under the arrangement.