On 14 December 2017 the International Monetary Fund (IMF) published a report following consultations with Mozambique under Article IV of the IMF’s articles of agreement.

The report notes that fiscal consolidation is essential for the recovery of macroeconomic stability as Mozambique’s economic growth is continuing to slow down. Although the government has eliminated subsidies on fuel and wheat, there are spending pressures as well as weaker revenue than anticipated, and the fiscal deficit will be more than 8% of GDP. Large financing needs and tight monetary policy are depressing the availability of credit to the private sector and especially to small and medium enterprises (SMEs).

The IMF report welcomes the measures taken by the government to reduce the fiscal deficit including revenue measures in the 2018 budget. In the absence of further measures the outlook for 2018 and the medium term is challenging especially in view of the continued weakening of revenue collection and of spending pressures. The IMF report therefore recommends that Mozambique should further consolidate its fiscal position by eliminating value added tax (VAT) exemptions and other tax exemptions to help mobilize additional tax revenues in addition to reducing current spending.

The report notes that a sustained fiscal effort will be required in the medium term to lower deficits. In addition to this decisive steps must be taken to strengthen the business environment and restructure financially weak state owned enterprises (SEOs). The authorities should continue developing their action plan to strengthen governance, transparency and accountability.