By Judith Ugwumadu | 6 January 2015

Mozambique must continue to push on with its structural reforms, with public financial management especially critical to maintaining economic growth momentum, the International Monetary Fund has said.

It has also urged the southeast African country to improve both VAT and overall tax administration and strengthen its institutional capacity to ensure transparent public investment and borrowing.

The fund noted that Mozambique would likely need to borrow more as foreign aid declines.

‘To ensure the efficiency of investment and borrowing, it is essential to further strengthen investment planning and implementation, as well as debt management,’ the IMF said.

‘Structural reforms focusing on PFM, monetary policy tools, banking supervision, and business facilitation should be implemented vigorously to sustain growth and render it more inclusive.’

Recent economic developments in the country have been robust, the IMF said following the Mozambique’s third review under its Policy Support Instrument, with growth for 2014 forecast at 7.5% with low inflation.

But performance under the PSI-supported programme had been mixed, due to some slippages during the second half of the year and some delays in implementing structural reforms.

The IMF said growth is expected to remain strong and be broad-based in the medium term, boosted by the natural resource boom and infrastructure investment.

But it added that fiscal consolidation needed to be initiated in the 2015 budget to restore prudent fiscal management and preserve debt sustainability.

‘This requires measures to contain current spending pressures while bringing investment to a more sustainable level,’ the IMF said.

Last month, the World Bank awarded $110m to Mozambique to support government efforts to improve PFM in the country and tackle poverty.