Bank of Mozambique says political and military tension could undermine growth

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Bank of Mozambique says political and military tension could undermine growth

3:39 CAT | 16 Mar 2016

The Bank of Mozambique said on Monday that the political and military tension and natural disasters plaguing the country may undermine the achievement of gross domestic product and inflation targets this year.

The bank’s warning came in a Monetary Policy Committee statement of following its meeting in Maputo on Monday.

“In the domestic environment, the committee noted the likely impacts of weather changes plaguing the country, combined with the political and military tension that hinders the free movement of people and goods throughout the country. These will affect the macroeconomic targets set for 2016, in particular the forecasts for GDP and inflation growth,” the press release reads.

The committee advocates strengthening the coordination of fiscal, monetary and sectoral policies, as well as monitoring the behaviour of the main macroeconomic indicators.

The bank decided to keep its standing lending facility interest rate at 10.75 percent, the standing deposit rate at 4.25 percent and the compulsory reserves coefficient at 10.5 percent.

The Mozambican government expects GDP growth of 7 percent in 2016, but the IMF thinks that unachievable and expects growth of between 6 percent and 6.5 percent.

Instability has been on the rise in Mozambique recently, with mutual accusations of armed attacks, kidnappings and murders of political leaders between the government and Renamo (Mozambique Armed Resistence), and the arrival in Malawi of thousands fleeing clashes in Tete province.

Police attribute the attacks on Mozambique’s main roads in Sofala, Manica and Zambezia provinces to Renamo’s armed wing, an accusation that the largest opposition party has never denied.

The worsening of the political and military situation has led President Filipe Nyusi to address an invitation to the leader of Renamo for the resumption of dialogue, but Afonso Dhlakama is insisting on the presence of mediators from South Africa, the Catholic church and the European Union.

Renamo has said it will seize power in the six provinces where it claims victory in the 2014 general elections some time in March.

Source: Lusa