The International Monetary Fund (IMF) Executive Board concluded its 2025 Article IV consultation with the Republic of Mozambique, highlighting a challenging macroeconomic backdrop of subdued growth, large fiscal and external imbalances, and elevated debt and financing pressures despite low inflation and adequate reserve buffers. Directors endorsed staff’s appraisal and called for a comprehensive reform package centred on credible fiscal consolidation, greater exchange rate flexibility, and strengthened financial sector risk oversight. Economic activity has been recovering gradually after a sharp contraction in late 2024, while inflation has remained low since December 2023. The current account deficit narrowed in 2025 but remained significantly wider than levels consistent with fundamentals; gross international reserves covered about 6.5 months of imports at end-2025, and FX shortages have led the central bank to tighten FX regulations and capital outflow controls while the exchange rate against the US dollar has remained stable since 2021. Financing conditions have tightened as domestic banks’ holdings of government debt plateaued amid debt service delays and net external financing turned negative; the overall fiscal deficit is estimated to have narrowed to 4.5 percent of GDP in 2025 from 6.2 percent in 2024, largely through cuts to goods, services and capital spending. Directors urged measures including wage bill containment, tax base broadening, stronger public financial management, action on fiscal risks from state-owned enterprises and the pension system, and improved debt management and transparency while protecting vulnerable groups; they also encouraged close monitoring of banks’ sovereign exposures and further improvements in supervision, stress testing and resolution frameworks. The IMF expects the next Article IV consultation with Mozambique to take place on the standard 12-month cycle.

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