Mozambique: Creditors may be penalised to ensure IMF funding - Moody's
File photo: Macauhub
Mozambique is facing a difficult economic and financial situation, but in the next few years, companies will have funds from international institutions for economic diversification projects, according to the latest Africa Report on the country.
The recently published report, a joint initiative of Africa Monitor Intelligence and Eupportunity, reviews the funds to be made available in the coming years by the European Union, the World Bank, the African Development Bank and others, concluding that “a significant effort is being made to promote the diversification of the Mozambican economy.”
The European Union and the World Bank have chosen rural development, particularly forestry, and the growth of the agricultural sector as priorities in their development aid strategies.
Investment in human capital has also been a means of achieving the goals set out in the strategies of international organizations, which also include investment in infrastructure, particularly transport and energy.
As far as the World Bank is concerned, the new strategy for Mozambique gives a glimpse of some energy, transport and education projects, so opportunities are expected in these sectors, the report said.
As for the African Bank’s strategy for Mozambique, it is expected to invest in infrastructure, whether in the transport, energy or agriculture sectors.
According to the latest International Monetary Fund forecasts, economic growth in Mozambique is expected to slow to 3% this year and 2.5% next year, a downward review from previous IMF forecasts.
However, the Mozambican economy presents encouraging prospects in the medium term – a 9.9% increase in 2023, a year in which the country’s natural gas exploration is expected to begin.
In 2017, the mining sector (coal and aluminium) led economic growth in the country, followed by the transport and agricultural sectors. All other sectors (energy, construction, tourism, financial services, industry) contracted.
The Africa Report stresses that the two-year blockade by western donors and defaulting on external creditors have led to a worsening of Mozambique’s public finances.
For the banking system, the main problem is a lack of liquidity and a significant amount of financing to the economy (business credit) has no return or the return comes late given the difficulties companies are facing to pay interest within the stipulated period.
Banks face growing problems of default by companies and private individuals and an increase in non-performing loans.
The decline in foreign investment has resulted in a shortage of foreign currency and a decline in export earnings, according to the Africa Report Mozambique, the first on this country, after a similar initial one on Cabo Verde (Cape Verde). (macauhub)Source: Macauhub