Mozambique needs to maintain budgetary discipline – Standard Bank

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Mozambique needs to maintain budgetary discipline – Standard Bank

1:06 CAT | 02 Nov 2018

The chief economist of the Standard Bank has told Lusa that the Mozambican government needs to maintain strong budgetary discipline and warned that next year will be very important for the Mozambican economy.

“Next year will be very important from an economic point of view, especially since two major natural gas projects are expected to reach the Final Investment Decision phase, with an investment decision potential of $55 billion for a economy of $12.5 billion, so it is substantial,” Fáusio Mussa told Lusa.

In an interview with Lusa about the economic outlook for the country, the Standard Bank’s chief economist said, “these investments, if they go ahead, open up room for the country to substantially develop the energy potential that is natural gas,” and, “obviously this can make it possible to improve the government’s initiative to stabilise the economy, i.e. to ensure stable inflation and a stable exchange rate and create a basis for the economy to start growing at a fast pace.”

He also noted that debt renegotiation is a key issue for Mozambique, not only because of international credibility, but also because of the fiscal space that it opens up for investments in projects that help accelrate the country’s economy.

“Beyond these two factors [debt renegotiation and the Final Investment Decision], what we can deduce from the decision to keep the interest rate unchanged is that strong fiscal discipline must be maintained, no matter what happens in the renegotiation of debt or in natural gas projects,” Mussa argued.

The Mozambican government, he said, “has to keep the budget deficit under control to allow some level of consolidation,” despite the fact that next year is an election year and, traditionally, public spending increases.

“I believe that, obviously, as an election year, there will be pressure in that respect from a budgetary point of view, but at the same time I notice that there has been a great effort made, including in the State Budget itself, to keep a check on these variables,” concluded the Standard Bank’s chief economist in Maputo.

Source: Lusa