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The Minister of Economy and Finance of Mozambique said on Wednesday that there are good prospects for economic development and return of financial stability to the country, but warned that it would require “much effort” and continuing sacrifice.
At a time when the country faces a strong devaluation of the metical and a sharp rise in the cost of living, Adriano Maleiane, alluding at a conference organised in Maputo by the Financial Times to the impact of the hidden loans scandal and the sudden worsening of public debt, congratulated the Mozambican people, “because they had already realised that, from April on, the situation had changed”.
Asked about the risk of social unrest in the light of riots in recent years, Maleiane said: “I congratulate the people of Mozambique because, when we don’t have, we are suffering.”
Maleiane said that the government was working with creditors to find a solution to the unsustainability of public debt and the resumption of International Monetary Fund (IMF) and the state budget donors support, suspended after the disclosure of hidden debt, and which will require an independent international audit of the accounts of the country, adding that “all this will require a lot of effort” in the short term.
“I ask Mozambicans to be patient, because in 2016, we will suffer further and, from 2017, we will continue to make an effort,” the minister said, noting that “a tightening of fiscal and monetary policy” is also necessary as way to encourage savings.
A week ago, the government of Mozambique officially acknowledged its inability to pay the next instalments of debts of state companies with hidden loans, advocating a restructuring of payments and renewed financial aid from the IMF.
According to Minister Maleiane, who went to London to explain the country’s financial situation to creditors, technical issues will be discussed throughout November in order to find a way out and enable Mozambique to honour its commitments.
“We have to look forward, and the first thing is to believe in ourselves, because we are doing our utmost to deserve that trust. So I went to London to explain to investors and avoid us getting to January without any money.”
The priority would be paying civil servants and pensioners “and with what is left, some investments here and there are being made”.
In addition to the devaluation of the metical, rising inflation and burgeoning public debt, Maleiane noted that Mozambique faces declining prices for its raw material exports, the effects of natural disasters and the political and military crisis between the government and the armed wing the Mozambican National Resistance (Renamo).
After two decades of economic growth rates of around 7 percent, the government has lowered its growth estimate to 3.7 percent in 2016, and even this remains uncertain.
“We must have peace. If we do not, 3.7 percent will be difficult to achieve,” he said.
Despite this “difficult phase”, the minister was optimistic about the country’s situation.
“If we take on all the potential we have and create better conditions for business, everything is possible and we may see not only a return to stability but also a very good future,” Maleiane said, referring to the prospect of strong revenue increases with the exploitation of natural resources in the next decade.
The minister warned, however, that the economy must be diversified in order to increase production and reduce dependence on externalities, and against just waiting for the start of the exploitation of Rovuma basin natural gas, estimated to be one of the largest reserves in the world.
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