Mozambique yet to recover from hidden debt scandal – UN

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Mozambique yet to recover from hidden debt scandal – UN

3:37 CAT | 22 Jan 2019

In file CoM

Economic analyst for Africa at the United Nations Helena Afonso says Mozambique has not yet overcome the consequences of the hidden debt scandal, pointing to restructuring and South Africa as “major risks”.

“Other significant risks for the country are a slowdown in economic activity in South Africa – a major destination for Mozambican exports – an increase above expected prices for imported goods such as fuel and food, as well as a possible lack of agreement in the negotiations on debt,” Afonso said.

Speaking to Lusa, the analyst in the African Economic Prospects Department said Mozambique’s high debt, which is over 100 per cent of GDP, will continue to negatively affect the outlook for the economy “and fiscal policy will continue to be guided by a commitment to fiscal consolidation aimed at reducing public debt and consolidating and rebalancing expenditure between capital investment and recurrent high expenditure”.

The UN predicts that Mozambique will grow by 3.4 per cent this year and next year, accelerating slightly to 4.1 per cent by 2020.

But the country “has not yet been able to recover from the recent impact of several negative external and internal shocks, in particular the discovery of debt concealed in 2016 amounting to approximately 10 per cent of GDP, which caused a sharp decline in public investment, foreign direct investment and foreign development aid,” Afonso said.

The growth forecast for 2020 is premised on a moderate growth in private consumption and firmer investment activity, “supported by increased foreign direct investment, particularly in megaprojects of liquefied natural gas, as well as recovery of agricultural activity and higher extractive activity, mainly in the coal sector.”

The report on the Global Economic Situation, now released in Geneva, is jointly prepared by the United Nations Department of Economic and Social Affairs (UN / DESA), the United Nations Conference on Trade and Development (UNCTAD), and the five regional departments with the contribution of the United Nations World Tourism Organization.

In the document, analysts say only interest payments on loans represent more than 15 per cent of government revenues last year and point out a huge government debt at about 100 per cent of GDP, falling only a few percentage points per annum”.

Public pressure to increase spending and protect subsidies remains high in Mozambique and other countries in the region, such as Botswana, Malawi and Mauritius.

In the global approach, the UN / DESA says global economic growth, expected to remain at three per cent as in the past year, “hides underlying risks and imbalances,” pointing to examples of “the confluence of short-term risks such as commercial tensions, financial fragilities and climatic risks.”

“Economic growth is uneven and often does not go where it is most accurate,” economists say, adding that “the underlying vulnerabilities endanger long-term progress in implementing the 2030 Sustainable Development Agenda.”

Among the potential triggers of a financial crisis, UN/DESA points to “global trade tensions, monetary policy adjustments in developed economies, commodity price shocks, Brexit-related political disruptions in Europe and economic disruptions or internal policies.”

Source: Lusa