Mozambican government plans to present amending budget “as soon as possible”

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Mozambican government plans to present amending budget “as soon as possible”

5:33 CAT | 01 Jul 2016

Noticias (File photo) / Adriano Maleiane, minister of Economy and Finance if Mozambique

The Mozambican government will present an amending state budget responding to changing macroeconomic assumptions including the downward revision of GDP growth “as soon as possible”, a Ministry of Economy and Finance spokesman has told Lusa.

According to Rogério Nkomo, the amending budget is not motivated by the country’s undeclared debts, but by changes in its economic situation.

“Public debt has had no effect on the state budget yet; it is growth assumptions that were reviewed, such as expected inflation and revenue,” he explained.

Bloomberg yesterday reported on a letter from the Permanent Secretary of the Ministry of Economy and Finance stating that all expenses other than salaries and pension payments are frozen pending the submission of an amending budget on 10 July.

Nkomo did not confirm that date to Lusa, only saying that the amending budget would take place “as soon as possible”, adding without further explanation that “what has been frozen are budgetary changes”.

“If we don’t do it now, we run the risk of presenting an amending budget with the wrong base,” he said.

As regards the previously undeclared debts totalling US$1.4 billion (EUR1.2 billion), Nkomo said that negotiations continue between the companies, the state and creditors, in particular Mozambique Asset Management (MAM), which failed in May to make its first repayment of US$178 million (EUR160 million).

“Negotiations are continuing and it seems that they are going well,” the spokesman said.

The Mozambican government’s state budget and its Economic and Social Plan, forecasting economic growth of 7 percent, inflation of 5.6 percent and a 10.2 percent deficit, were approved by parliament in December 2015.

Since then, the Mozambican economy has been shaken by a precipitous depreciation of the metical against the dollar, cooling economic growth, higher inflation and lower investment and foreign aid.

The International Monetary Fund (IMF) and donors to the state budget this year suspended their support after the discovery of US$1.4 billion in government-guaranteed loans to companies with state participation not declared in the public accounts.

The now-disclosed loans have pushed Mozambique’s public debt to US$11.66 billion (EUR10.4 billion), of which US$9890 million (EUR8.9 billion) is owed abroad. This represents over 70 percent of gross domestic product an increase of 28 percentage points since 2012.

At the end of the visit of an IMF mission to Maputo, on Friday, the institution said that Mozambique faced difficult economic challenges, and that expected economic growth in 2016 to slow to 4.5 percent against 6.6 percent in 2015, almost 3.3 percentage points below historical levels, with a substantial risk of projections lowering further.

According to the IMF, inflation has been rising rapidly, reaching 16 percent in May, and fiscal policy in 2015 and the first half of the year was overly expansionary, with an increase in net credit to the government far exceeding expectations.

Source: Lusa