IMF thumbs down: secret debt details & major spending cuts required - By Joseph Hanlon
The Economist Intelligence Unit (EIU) believes that Mozambique will continue to be a two-speed country and that the government is not committed to investment-friendly policies despite the need to win back investors.
In an analysis of the government’s efforts, experts from the economic analysis unit of The Economist magazine write that “after a tumultuous year the government is eager to convince foreign investors that Mozambique is open to business”.
However, they added in the analysis that Lusa has access to, “it did not accompany the recently launched charm offensive with substantive efforts to improve the business environment.”
The Economist analysts cite the recent travels of the country’s president, who in the past six months has been to Europe, the United States and Asia, returning with promises of investment from major oil companies such as Eni or Shell.
The problem, they point out, is that “these investments are almost exclusively focused on the growing gas sector”, and would take place regardless of the country’s internal problems because “the profit margins in these operations, which are the cheapest in the world, are too appealing for investors to turn their backs on”.
Economic growth based entirely on foreign direct investment focused on export-oriented projects “will hardly lead to comprehensive growth in a low-income country with high poverty rates and a rapidly growing labour market”.
The analysts acknowledge that the government knows that the economy needs to be diversified and hopes to attract investment in tourism, agriculture and manufacturing to protect the economy from raw material price volatility and create jobs, but, they warn, “investment opportunities in these non-energy sectors are less attractive” and with slower and lower rates of return.
That is why, they say, “Mozambique’s economy will continue to be a story with two parts, with relatively rapid growth in the extractive sectors but a much slower performance in others, which will cause the expected growth rate to remain at five percent per year until 2021, while a significant improvement in living standards remains unlikely”.Source: Lusa