Washington - Mozambique's economic growth will slow this year due to a decline in export revenue, the International Monetary Fund said on Wednesday, calling for increased government spending to stimulate demand.
The IMF mission chief for Mozambique, Robert Sharer said in a statement that the country's gross domestic product was expected to slow to 4.3% from 6.8% last year, with gradual recovery starting in 2010.
Mozambique has requested financial support from the IMF under the Exogenous Shocks Facility to cushion the impact of the global slowdown on its economy. The IMF board will discuss the request in July, Sharer said.
"In the short term, given Mozambique's low level of public debt, the mission sees scope to at least partly offset the impact of the global economic crisis on Mozambique with somewhat more expansionary fiscal and monetary policies," he said.
However, the short-term economic stimulus should not jeopardise medium-term economic stability, which remained critical for Mozambique to resume robust economic growth and make decisive progress in poverty reduction, he added.
The mission visited Mozambique between April 28 and May 13 for consultations and the fourth review under the IMF's policy support instrument.
"Prudent fiscal policies in recent years provide scope to maintain spending at budgeted levels and raise domestic financing by 1.8% of GDP, compared with a repayment to the banking system of -1.9% last year," said Sharer.
He said the mission also saw some scope for interest rate cuts in the period ahead. Inflation was expected to remain low at about 5% to 6% in 2009, Sharer said.
- Reuters