Mozambique: President asks police to ensure normal functioning
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Financial rating agency Fitch said yesterday that although economic recovery in Mozambique was currently being limited by the debt crisis effects, medium-term growth prospects were strong.
“Economic recovery is being constrained by the effects of the debt crisis; growth prospects, in the medium term, are nevertheless strong, as there are positive signs of the materialisation of megaprojects that have been awaited for a long time,” a note sent to investors declares.
In the document, to which Lusa has had access, the Fitch analysts write that the country is “stuck in default”, and note that “there has been little progress on resolving the sovereign default”, which they in fact expect will be a lasting situation.
“The country is failing payments on foreign currency debt, as well as the payments of the loans contracted by public companies endorsed by the government,” it adds.
The International Monetary Fund has said that an audit of public companies “has failed to meet the conditions required, due to information gaps,” Fitch reports, and “it is not clear how debt talks will be affected by possible disputes between creditors and the budgetary consequences of gas projects”.
The Fitch note comes at the same time that a UN report on the World Situation and Economic Perspectives (WESP) finds that financial default and political tensions limit investment and limit the country to growth of below 4 percent per annum through to 2020.
“Investment in Mozambique is being limited by the financial default in January and the high level of debt,” the report released this week in New York reads.
“Growth will also be hampered by political tensions,” the report said, forecasting economic expansion of 4.1 percent this year and a decline to 3.8 and 3.9 percent in 2018 and 2019, respectively.
The report prepared by the UN Department of Economic and Social Affairs, the United Nations Conference on Trade and Development (UNCTAD) and the five regional commissions predicts a reduction in inflation, from almost 20 percent last year to 7 percent this year, 6 percent in 2018 and 6.5 percent in the following year.
Also this week, the government approved a decree that defines the procedures for issuing and managing public debt, including the provision of guarantees by the state.
The decree establishes “what is necessary for the government to incur debt and for the issue of guarantees,” Minister of Economy and Finance Adriano Maleiane said.
“It is a very important instrument that will allow all the organs of the state, and even society generally, to understand how and when to issue guarantees,” the minister said.
The Mozambican government has been pressured by civil society and international financial institutions to practice more transparent management of public debt after the discovery in 2015 of guarantees that the former executive secretly provided in favour of three related public fisheries and maritime security companies totalling US$2 billion (EUR 1.6 billion), greatly augmenting the country’s level of indebtedness.
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