October 30, 2013 / 8:27 PM / 4 years ago

IMF expects faster growth in Mozambique next year

WASHINGTON, Oct 30 (Reuters) - Mozambique’s economic growth should speed up to 8.3 percent next year from 7 percent this year, led by accelerating business activity, the International Monetary Fund said on Wednesday.

Mozambique, one of Africa’s fastest-growing economies but also one of its poorest, has attracted investors such as Brazil’s Vale and London-listed Rio Tinto that are eager to develop some of the world’s largest untapped coal and gas reserves.

“Mozambique is likely to remain one of the most dynamic economies in sub-Saharan Africa, in part thanks to the expected natural resource boom,” the IMF said in a statement after visiting the country. However, the money from resources should only materialize by the end of this decade, the IMF cautioned.

“Within this context, it will be important to continue the focus on policies that attract investment in other sectors of the economy, including in particular agriculture, where 80 percent of the Mozambican population makes a living,” the IMF said.

The IMF also called on the government to improve its tax collection and increase investment in infrastructure and social spending, while ensuring the money is spent in the best way.

The IMF said it welcomed the central bank’s policies to create more room for private sector credit and contain inflation, but said it was important to remove impediments to bank lending.

Mozambique’s central bank cut its main lending rate by 50 basis points to 8.25 percent earlier this month, which it said was consistent with meeting economic growth and inflation targets for the country.

The bank noted that data from the national statistics agency pointed to a decline in business confidence, as shown by the economic climate index, reflecting a deteriorating outlook for demand.

Last month, Mozambique sold its first dollar bond, a $500 million seven-year issue that yielded 8.5 percent. The bond was issued by the Ematum, a new state tuna company, and the proceeds will go toward expanding a tuna fleet, puzzling some investors.

The IMF said Mozambique should make sure that the tuna company’s non-commercial activities are reflected in the government’s budget and accounts next year.

IMF officials, who left Mozambique on Wednesday, did not comment on the country’s uncertain domestic political situation in their statement.

The country’s Renamo opposition group declared last week that it was terminating a 1992 peace accord that ended a 1975-1992 civil war, prompting concerns that an escalation in tensions could disrupt economic growth.

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