Financial and Monetary Aspects in the Process of Economic Recovery: The Case of Mozambique

Abstract

Mozambique is one of the world's poorest countries, one of the most aid dependent and has one of the highest scheduled debt service ratios. Its process of economic reconstruction started in 1987 when the government opted to reform the state, progressively liberalising to the private sector and to the market. The World Bank and the IMF were joined, giving rise to a consistent international aid inflow. Monetary and credit tightening aimed at reducing domestic demand and inflation, and devaluation policies to stimulate export and reduce import, have been the major tools in the process of stabilisation. Ambitious reforms have created a stable environment for investment and private sector expansion and built foundations for sustained growth. After several years of deep stagnation the economy is showing a consistent recovery though not sufficient, to full debt repayment. Financial improvements are needed to mobilise saving and investment while a great fiscal and external deficit make international aids an important input for the domestic economy. Though there is the risk of indeterminate external financial dependency if autonomous growth is not achieved. Unless unilateral forgiveness.

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