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Harare - Mozambique is on a strong growth path helped by robust investments, the International Monetary Fund (IMF) said on Thursday.
The IMF, which completed a review of the country’s economic performance last month, said it was largely satisfied with the progress made. Mozambique has started to see growing investment in its mining and natural gas extraction industries.
Fishing and agriculture are also seen as potential areas for foreign investments. A South African delegation which recently visited Mozambique said the country offered attractive investment opportunities.
IMF executive board acting chair Min Zhu said on Thursday that Mozambique’s low inflation and strong economic growth was commendable. The country should now strengthen fiscal adjustments to tighten revenue losses registered at the end of last year.
“While structural reforms have been proceeding, there were macroeconomic policy slippages and reserve losses in late 2014. With a strong fiscal adjustment envisaged in the current budget and a recent tightening of liquidity conditions, needed steps to maintain macroeconomic stability are now in place,” said Zhu.
The IMF added that the decline in Mozambique’s international reserves has largely been reversed, and that greater exchange rate flexibility will help the economy respond better to external shocks in the outlook period.
It urged the government to do more to improve public financial management, including stronger controls over state-owned enterprises and enhanced management of fiscal risk. This would ensure that new policy measures enhance the country's business climate.
Although there has been strong investor interest in the country’s mining and natural gas sectors, overreliance on commodities will leave it susceptible to commodity price fluctuations. Investors are eyeing gold mining projects in Mozambique, which is still emerging from a protracted period of civil strife which has destroyed the country’s infrastructure, leaving it scarred and needing further investment to prop up its infrastructure competitiveness.
Current trends are pointing to continued weakness in commodity prices, prompting other experts to say Mozambique and other developing economies in the region such as Zimbabwe and Zambia should diversify their economies beyond mining.
“Investments in large coal and natural gas projects underpin a positive medium-term outlook, but low commodity prices have increased near-term risks. Ongoing progress on a broad range of structural reforms, including the passage of the new mining and hydrocarbon legislation, is encouraging,” said the IMF.
