IMF lowers Mozambique growth forecast to 4.5% in 2016

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IMF lowers Mozambique growth forecast to 4.5% in 2016

12:11 CAT | 05 Oct 2016

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The International Monetary Fund (IMF) on Tuesday lowered its Mozambique growth forecast to 4.5 percent this year, rising to 5.5 percent next year and 6.8 percent in 2021.

The World Economic Outlook forecasts represent a downtick from May, when Fund analysts anticipated an economic growth of 6 percent this year and 6.8 percent in 2017.

The report does not give any reason for this lowering of its growth estimates, but most analysts and the government itself have pointed to the decline in the price of raw materials, the hidden debt crisis, the suspension of international donations and internal factors such as the political and military crisis and disturbances in agricultural production as reasons.

Cooperation between Mozambican authorities and the IMF and the World Bank deteriorated in April following the discovery of debts worth more than EUR1 billion the previous government contracted between 2013 and 2014 without the knowledge of parliament or international financial institutions.

Following the revelation of the loans, the IMF suspended disbursements of a loan of more than EUR 150 million to Mozambique and has demanded a forensic audit prior to any resumption of financial cooperation.

The three major rating agencies have lowered the country’s rating, making it more difficult to access loans from lenders, who have recently been charging interest of almost 20 percent for sovereign debt transactions.

Furthermore, Mozambique faces economic woes caused by the decline in the value of raw materials exports, the strong devaluation of the metical and rise in inflation, natural disasters and military conflict in the centre of the country.

The world economy is expected to grow 3.1 percent this year, according to IMF projections, anticipating acceleration in 2017 to 3.4 percent, a downward revision of 0.1 percentage point per for each figure.

The Euro zone is expected to grow 1.7 percent this year and slow down to 1.5 percent in 2017.

Source: Lusa