Assembly approves 2019 Economic and Social Plan

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Assembly approves 2019 Economic and Social Plan

9:15 CAT | 07 Dec 2018

Photo: Notícias

The Mozambican parliament, the Assembly of the Republic, on Thursday approved the government’s Economic and Social Plan (PES) for 2019, which had been debated over the previous two days.

The 132 deputies of the ruling Frelimo Party present voted in favour of the motion approving the plan, while 88 deputies from the former rebel movement Renamo and from the Mozambique Democratic Movement (MDM) voted against. One MDM deputy broke with his group and abstained.

The plan envisages a GDP growth rate in 2019 of 4.7 per cent. This will rely heavily on the extractive industry which is expected to grow at a rate of 14 per cent.

Agriculture is forecast to grow at 5.5 per cent in 2019 and six per cent growth is forecast for the fisheries sector. Manufacturing industry is expected to grow at 3.1 per cent. Most of the growth will be in the cement industry (10 per cent), food processing (nine per cent), and drinks (six per cent).

The other main macro-economic targets for 2019 are an annual inflation rate of around 6.5 per cent, a rise in the value of the country’s exports from 4.9 billion US dollars this year, to 5.2 billion dollars, and net international reserves sufficient to cover six months’ imports of goods and non-factor services.

Introducing the plan on Tuesday, Prime Minister Carlos Agostinho do Rosario pledged that the government “will prioritise diversification of the economy, improving the business environment, and implementing combined fiscal and monetary measures that will stimulate the economy and keep inflation stable”.

After the first vote, the Assembly plenary moved to the second reading of the motion, and Renamo introduced its habitual wrecking amendment. Its amendment was to change the phrase “the plan is approved” to “the plan is rejected”.

Since a vote had already been taken approving the plan, this amendment was entirely illegitimate, and the chairperson should have thrown it out. However, long experience shows that it saves time just to vote on Renamo amendments, instead of arguing points of procedure.

Renamo moves the same amendment every year with the same result – the amendment goes down to defeat with Frelimo voting against it, and the opposition deputies in favour.

The Assembly then moved to the second and final reading of the government bill approving the 2019 budget. The Assembly’s Plan and Budget Commission, introduced a series of minor amendments, all of them ensuring that the figures in the budget law are the same as those in the various charts on which it is based. The discrepancies were not significant, but they seem to indicate that the budget law was drafted hastily.

Once again, Renamo introduced its favourite wrecking amendment, seeking to replace the words “the budget is approved” by “the budget is rejected”. And once again the Frelimo majority ensured that the amendment was thrown out.

The total public expenditure forecast in the 2019 budget is 340.4 billion meticais (about 5.53 billion US dollars). Of this, 196.6 billion meticais is for running costs. The capital budget accounts for 102.3 billion meticais, while the remaining 41.5 billion is for financial operations.

Government revenue for the year, mostly from taxation, is estimated at 236.3 billion meticais. This leaves a deficit of 90.9 billion meticais (about 1.48 billion US dollars), to be covered largely by foreign grants (27.7 billion meticais) and soft loans (43.7 billion meticais). The rest of the deficit will be covered by domestic indebtedness – the issuing of 19.4 billion meticais worth of high interest bearing treasury bonds.

Opposition deputies protested at the debt servicing provisions in the budget. 35 billion meticais (equivalent to 3.4 per cent of GDP) is earmarked for debt servicing. Most of this, 24 billion meticais, services the domestic debt, and is the result of a sharp rise in the interest rate on treasury bonds. The interest rate was 10 per cent in 2015, and is now 26 per cent.

11 billion meticais is earmarked for servicing the foreign debt. Contrary to the belief expressed by opposition deputies, this does not include the illicit “hidden” debts run up by the Guebuza government. If the government reaches agreement with creditors over these debts (arising from two billion US dollars worth of government-guaranteed loans to the security related companies Ematum, Proindicus and MAM), then the debt servicing for 2019 will certainly rise, and the government may need to bring a corrected version of the budget back to the Assembly.

The budget law will also allow the government to issue loan guarantees for 151.25 billion meticais (2.48 billion dollars). Most of this is to cover a loan of two billion dollars which the National Hydrocarbon Company (ENH) must take out on the international markets to cover its participation in the liquefied natural gas projects, in the Rovuma Basin, off the coast of the northern province of Cabo Delgado.

This horrified some of the opposition deputies, thanks to the disastrous experience of the illegal guarantees for the Ematum, Proindicus and MAM loans. They simply did not accept the government assurance that there was almost no chance that the guarantee will ever be activated.

Some of them had no idea how guarantees work. MDM deputy Silverio Ronguane repeatedly described the guarantee as “theft”, and claimed that Frelimo would distribute the money among its own members.

Source: AIM