Mozambique: Year begins with macroeconomic stability, despite climatic shocks

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Mozambique: Year begins with macroeconomic stability, despite climatic shocks

3:45 CAT | 26 Apr 2024

FILE - For illustration purposes only. [File photo: Corporate finance institute]

Despite climatic shocks affecting the productive sector, the first three months of 2024 were marked by macroeconomic stability, indicated by a general price level maintaining a deceleration trend, exchange rate stability, and revenue collection.

The government’s evaluation of the Economic and Social Plan and State Budget (PESOE) for the first quarter reveals this. The document, not yet available to the public, shared during the latest Council of Ministers session, also highlights an increase in Net International Reserves (NIR) to cover non-factorial goods and services imports for 4.8 months, and Metical stability against major currencies.

Regarding taxes, State revenue collection in the first quarter reached about 73.3 billion Meticais, over eight billion more than the previous year. State expenditure was 97,897.8 million Meticais, accounting for 17.2% of the budget.

Despite the government’s positive assessment, other economic studies suggest constraints on economic activity due to raw material shortages, credit access difficulties, and product placement challenges.

Economist Octávio Manhique believes it’s too early to gauge the effects of climatic shocks, which may reflect in second-quarter indicators. He anticipates indicators worsening throughout the year and suggests the Central Bank apply cautious measures to curb inflation. Regarding the 2023 General State Account, the government reports a 5% GDP growth, attributing it to positive performances in agriculture, extractive industry, and services sectors.

The NIR increased from the planned three months to 4.3 months of import coverage. Revenue collection reached about 326 billion Meticais, 30% of the GDP, reflecting fiscal reforms aiming at broadening the tax base and revenue source diversification. State expenditure stood at 468,242.7 million Meticais, with 83.4% funded internally. Inflation averaged 7.1% in 2023, a decline from 10.3% in 2022.

Source: O Pais