“IMF forecasts should be viewed with caution,” warn Mozambican economists

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“IMF forecasts should be viewed with caution,” warn Mozambican economists

7:30 CAT | 20 Jan 2016

Lusa

The International Monetary Fund (IMF) believes that natural gas production in Mozambique will have a massive impact on the country with real average gross domestic product (GDP) growth reaching 24 percent and liquefied natural gas accounting for more than 50 percent of projects in production by the mid-2020s.

Mozambican economists however argue that the IMF forecasts should be viewed with caution because high expectations around coal, energy and other products in the past have translated into almost nothing.

The IMF says that the production and export of liquefied natural gas will begin in 2021, with production gradually increasing during the decade to 2028 with an average production of 89 million tons per year.

Economist João Sitoi advises looking at these predictions with caution because there may be factors and risks that may cause them to not materialize or have little impact on the population.

Another economist, João Mosca, considers it worrying that the expected growth will be based only on gas. “Basically, it is an economy with offshore exploration, which has other implications because everything is done at sea and, therefore, the real effect on the ground on the economy and the population will be very weakly felt,” he says.

Mosca points out that, if those revenues actually arise, the key issue will be how the government manages them in favour of more diverse social development, “so that other sectors of the economy can flourish on the back of revenue from gas”.

“It all depends on governance, and negotiations between the government and the companies exploring for gas, and on Mozambique’s internal policies. But also on society, how it will react to government policies in situations that may not be very supportive of social development in the country.”

According to the IMF, the impact on tax revenues from gas production could reach US$500 billion by 2045, causing the state budget to no longer be dependent on external financing, as is currently the case.

Source: VOA Português