Mozambique: Budget shrinks, but state expenditures grow by 7 billion meticais

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Mozambique: Budget shrinks, but state expenditures grow by 7 billion meticais

3:08 CAT | 21 Jul 2016

O País

Responding to “global economic slowdown, the falling price of major export products, natural disasters and reduced foreign direct investment and direct support to the budget,” Filipe Nyusi’s government on Monday presented parliament with a draft amending budget.

The amending budget’s cuts of 24 billion meticais will affect public investment, education, justice, the intelligence services, the presidency, the armed forces and social welfare. The headline figure however fails to hide the fact that the budget will also actually increase operating expenses from about 136 billion meticais to 143 billion with items such as Other Current Expenditure, Current Transfers and Debt Charges getting more money in the new budget, which is to go to the vote on Friday.

Other Current Expenditure

‘Other current expenditure’ sees the largest growth. The 2015 budget, approved and in place, allocated 1,283 million meticais to the item, while the amending budget now puts the number at 10,544 million meticais, no less than eight times the figure originally planned.

It is no coincidence that the allocation has grown so much. ‘Other current expenditure’ will provide funds that the State can use to cover last-minute expenses.

In finance minister Adriano Maleiane’s projection, there are numbers that have not yet been incorporated and may yet upset calculations, hence the decision to create a backup to match the challenge. Such are the disbursements of cooperation partners and debts guaranteed by the state.

In the first half of this year, donors suspended direct support to the state budget amounting to US$ 265 million, and are waiting to see what position the International Monetary Fund and the World Bank take on Mozambique. Meanwhile, the first repayment of the Proindicus state-guaranteed debt of around US$178 million has been on hold since 23 May. The more than ten billion meticais in the ‘Other current expenditure’ item are there to prevent the government from being caught by surprise by just such charges.

Debt charges

The amended budget will also correct the state’s commitments to creditors, swollen from 12.5 million meticais to over 15 billion meticais. The government does not say exactly what these commitments are, but one hefty debt that has passed into state hands is that of Ematum.

In June this year, the Cabinet decided to restructure [Ematum] loans worth US$350 million into sovereign debt. The decision allowed an extension of the five-year repayment period to seven years, easing installments from US$200 million to US$76 million annually. The amount is to be paid in two annual installments, the first having been released in the first months of 2016. Now the second tranche remains to be paid, and that will come … from the new state budget.

Austerity at the expense of pubic works

Savings in government accounts will be made at the expense of public investment, particularly in infrastructure such as roads and bridges. It is to drop from 40 billion to almost 35 billion meticais. Health and agriculture are to be spared, but education, justice and social welfare have not escaped Maleiane’s cuts.

Two billion in dues

The state will pay about two billion meticais this year in dues to the African Development Bank and the International Monetary Fund, financial organisations to which it belongs.

Membership of those institutions requires payment of annual dues which were not allocated in the state budget in current operation and approved in December last year. In the draft amending budget, the expense is incorporated into the Ministry of Economy and Finance’s Current Transfers item.

This information was confirmed Ministry of Economy and Finance spokesman Rogério Nkomo, who said that the bill had come to light in recent days, necessitating escalation of the Ministry of Economy and Finance’s budget allocation 431 million to 2,400 million meticais.

Parliament gets 10 million more

The Casa Militar, which ensures the personal safety of the president, his family and guests, will benefit from the budgetary amendments with an increase in resources from about 864 million to 917 million meticais.

Parliament’s budget also rises, from 885 million to close to 900 million meticais.

The state security apparatus has not however been so lucky, with spending on the Secret Service, Ministry of Interior, Ministry of Defence and Armed Forces falling. The Presidency of the Republic and the Prime Minister’s office share their misfortune, with the Presidency’s 1,401 million meticais budget falling.

Source: O País