Mozambique must regain debt sustainability without jeopardising growth – IMF

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Mozambique must regain debt sustainability without jeopardising growth – IMF

2:18 CAT | 02 Dec 2020

File photo: IMF

The International Monetary Fund’s resident representative in Mozambique yesterday stated that the country needs to make public debt sustainable without jeopardising growth, pointing to natural gas revenues as an opportunity to control indebtedness.

Brazilian Alexis Meyer-Cirkel classified the current volume of Mozambique’s public debt as “a challenge” during an IMF “The Regional Economic Outlook for Sub-Saharan Africa” webinar, saying: “Debt must return to sustainable levels without hampering growth.”

“Debt stabilisation in the coming years will be very important; we have to be very careful with debt,” the IMF representative emphasised. Mozambique’s payments to creditors divert resources which are needed for investment in the economy and in social areas.

Alexis Meyer-Cirkel expressed optimism regarding the reversal of the current public debt trajectory in Mozambique by dint of the large investments and revenues that will be generated from the exploration of natural gas in the Rovuma basin, in the north of the country.

Mozambique, he continued, mirrored the decline of Sub-Saharan African economies caused by the Covid-19 pandemic, but escaped a more severe recession and could be among the countries to experience a recovery in 2021.

“Mozambique recorded a less pronounced drop, and agriculture was the engine of that resilience,” he said.

The IMF resident representative said the country lost two years of gains in terms of Gross Domestic Product per person (GDP per capita) against an average of five years of GDP per capita lost by other Sub-Saharan African countries.

Alexis Mayer-Cirkle pointed out the diversification of the productive base, investment in education and in human capital and the strengthening of institutions as key for the country’s economy becoming more resilient to shocks.

Last month, Mozambique’s Minister of Economy and Finance Adriano Maleiane said in parliament that Mozambique’s public debt amounts to US$12.3billion (€10.42 billion).

A 16% share of that amount (about US$2 billion) is owed to China, he added.

The 2020 Amending Budget lowered the growth forecast for this year from 2.2% to 0.8%, while Standard Bank’s economic research office last week improved its forecast for the Mozambican economy, anticipating a recession of 0.9% instead of 1.3%.

Source: Lusa