Mozambique: State business sector makes the national economy vulnerable to risks

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Mozambique: State business sector makes the national economy vulnerable to risks

3:53 CAT | 10 Aug 2022

Photo: TVM

According to the Ministry of Economy and Finance, there is a strong possibility that the Mozambican currency will lose value over the next five years. The ministry also admits that the state business sector makes the economy vulnerable to risks.

The most recent report by the Ministry of Economy and Finance on the implementation of the Economic and Social Plan and the State Budget underlines the strong possibility of a fall in the value of the metical and an increase in the general level of prices of goods and services over the next five years.

“Regarding macroeconomic risks, three sources are identified that could create budgetary deviations, if they materialise, namely, the slowdown in economic growth, the vulnerability of the exchange rate and accelerated inflation, with the probability of occurrence [of the three aforementioned events] estimated at 42.9 %, 71.4% and 42.9%, respectively, in the medium and long term,” reads the document consulted by ‘O País’.

According to the Ministry of Finance report, the state business sector, which represents more than 12% of gross domestic product (GDP), natural phenomena and disasters make the national economy increasingly vulnerable to these risks.

In order to avoid these probabilities, the executive has created economic policies that resulted in an increase in production in the main sectors of activity, and provided a fund to respond to the challenges of the state business sector.

The report also mentions that, in the first half of this year, deviations in fiscal forecasts remained above those which had been foreseen regarding fiscal sustainability risks.

It should be noted that the Bank of Mozambique recently decided to hold the monetary policy rate (MIMO) at 15.25%. For the central bank, the decision is in line with the objective of reducing inflation to single digits in the medium term, resulting from the slowdown in external demand and the reduction in international prices of goods, in a context of maintaining exchange rate stability.

From January to June of the current year, the state mobilised more than 178 billion meticais, corresponding to 39% of the annual forecast, with internal resources standing at almost 50% and external resources at 10% of the programmed amount.

External donations reached five billion meticais, equivalent to six percent of the annual forecast, and external credits stood at over five billion meticais, just over 45% of the annual forecast.

By Edmilson Lambo

Source: O País