Lower growth, higher inflation, expenditure cuts: Mozambique govt announces amending budget

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Lower growth, higher inflation, expenditure cuts: Mozambique govt announces amending budget

10:11 CAT | 08 Jul 2016

The Mozambican government announced an amending budget for 2016 that lowers economic growth forecasts from 7 to 4.5 percent, reduces revenue and expenditure forecasts and imposes austerity measures, particularly in operating costs.

“The impact of all the austerity policies will total 24 billion meticais (EUR 339 million, around US$375.5 million),” said Minister of Economy and Finance Adriano Maleiane at a press conference after an extraordinary session of the Council of Ministers held yesterday in Maputo.

According to Minister Maleiane, the reduction of operating costs on issues related goods and services will be of 40 percent.

Maleiane said that the value of overall spending will go from 246 billion meticais (more than EUR 3.4 billion) to 242 billion meticais (EUR 3.3 billion).

Investment, Maleiane said, had suffered most, but the education and health sectors will suffer no essential restriction.

The amending budget lowers the economic growth forecast for 2016 to 4.5 percent, a change justified by the economic slowdown and the rise in debt service costs resulting from the depreciation of the metical.

Adriano Maleiane Maleiane announced an increase in the fiscal deficit from 10.2 percent to 11.3 percent of gross domestic product (GDP) as a result of reduction of the collection of revenues from 25.9 percent to 24.1 percent of GDP, from 176 meticais billion (EUR 2.4 billion euros) to 165 billion meticais (EUR 2.3 billion).

In addition to the containment measures, Maleiane announced that the government is to adopt measures to stimulate the economy to achieve growth of 5.2 percent in 2017.

“We are monitoring the functioning of the internal and external markets,” Maleiane said, adding that creating a good business environment was a government priority.

“We also want to look at how we levy taxes,” Maleiane said, indicating that fiscal policy is “the solution to the functioning of the state”.

In relation to the undisclosed government-guaranteed debts of state-owned companies totalling US$1.4 billion (EUR 1.2 billion) which came to light in April, the finance minister said that the servicing of the debt is not recorded in the amending state budget.

“In the current exercise, Mozambique Asset Management (MAM) and Proindicus have not been taken into account,” he said, noting that in MAM’s case, the state-owned company is still negotiating its debt repayment, after missing the first installment in May.

In December, when the State Budget was approved by the Assembly of the Republic, the Mozambican government has lowered the economic growth of 7.8 percent to 7 percent and had forecast average annual inflation of 5.6 percent and 10.2 percent deficit.

At the time, the Minister of Economy and Finance justified the revision of GDP growth prospects with the continuing drop in the value of raw materials in the international market and the depreciation of the metical due to the strengthening of the dollar.

Source: Lusa