The World Bank director for Mozambique, Idah Pswarayi-Riddihough, and the country’s Minister of Economy and Finance, Max Tonela announced today in a joint press conference a US$300 million grant in support of Institutions and Economic Transformation Development Policy Financing (DPF) operation.
Over the last 6 months, the Government of Mozambique has been having discussions with several financial, bilateral, and multilateral partners, including the International Monetary Fund, with which an agreement was signed last May signaling the country’s return to international markets.
According to Minister Max Tonela, the country is shifting into a more proactive economic strategy following the announcement in recent weeks of a stimulus package (dubbed PAE), and the agreement signed today will contribute to the budget deficit (OE 2022 deficit; 156,660.2 million MT) prioritizing social investment, particularly in health and Education.
The agreement with the World Bank marks an important step in resuming the country’s path to economic growth as multilateral budget support has been suspended since 2016.
The operation is based on the continuation of the public finance management reforms that Mozambique has been implementing, especially the measures taken on regulation and transparency in the management of revenues from natural resources and improvements in the public procurement system.
Mr. Tonela, who took office last March, has been guiding the ministry toward an agenda to facilitate the development of the private sector in order to alleviate the country’s dependency on imports and to create a sustainable return to economic growth. To that end, the Ministry has been slowly implementing measures to simplify business requirements, attract foreign investments, incentivize climate action, create better access to finance for SMEs, and to create more jobs.
Also read: Mozambique economy grew 4.37% in H1
The Mozambican economy grew by 2.16% in 2021, and for 2022 the government has set as its target the 2.9% GDP increase foreseen in the Economic and Social Plan and State Budget approved by parliament, yet the actual GDP growth rate was 4.14% in the first quarter of 2022, rising to 4.59% in the second quarter (from April to June) according to official numbers.
Mozambique’s commitment to supporting resilience actions in the context of climate change is also part of the Country Partnership Framework, as a guiding instrument for the World Bank’s support strategy.