Republic of Mozambique: Second Review Under the Three-Year Arrangement Under the Extended Credit Facility, Requests for Modification of The Monetary Policy Consultation Clause, Waivers of Nonobservance for Quantitative Performance Criteria, and Financ

This paper highlights Republic of Mozambique’s Second Review under the Three-Year Arrangement under the Extended Credit Facility (ECF), Requests for Modification of The Monetary Policy Consultation Clause, Waivers of Nonobservance for Quantitative Performance Criteria, and Financing Assurances Review. The three-year ECF arrangement aims to support Mozambique’s economic recovery, reduce public debt and financing vulnerabilities, while fostering higher and more inclusive growth through structural reforms. The monetary policy stance is appropriate to help contain inflationary pressures and rebuild reserves. While inflation has decelerated faster than expected, continued caution is warranted to help anchor inflationary pressures and support macroeconomic stability. Based on the mixed program performance, the authorities have taken substantive actions to resolutely address macroeconomic challenges and keep the program on track, especially to reduce the wage bill and keep the fiscal outlook aligned with program targets. The tight monetary policy stance is appropriate to contain inflation pressures.