Mozambique’s budget for 2017 is “unrealistic” – EIU

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Mozambique’s budget for 2017 is “unrealistic” – EIU

12:12 CAT | 12 Dec 2016

A woman selling tomatoes in a market in Dedza, Malawi, along the border with Mozambique.

The Economist Intelligence Unit (EIU) says that Mozambique’s budget for next year is “unrealistic”, and that the austerity that IMF assistance implies hardly allows for salary increases for civil servants.

“From our point of view, the budget is unrealistic,” analysts of the economic analysis unit of the British magazine The Economist write.

In a note on the 2017 Mozambican budget, the EIU emphasises that “the financial envelope should be significantly lower than that projected by the Government, with small changes in policy hardly cancelling out the fact that slow economic growth and low private sector investment will have a strong impact on tax revenues”.

For the consultants preparing the economic analysis of the British magazine, the Mozambican government’s forecast of external indebtedness is also “unlikely”, especially given the country’s financial difficulties and the lack of confidence in the financial markets.

“Amidst concerns in the international markets about the quality of sovereign credit and the severe liquidity pressures in the domestic market, we think it is unlikely that the government will get loans at the level it expects,” the note reads.

The Mozambican State Budget (OE) for 2017, presented on Wednesday by the Government in the Assembly of the Republic, provides for the payment of interest on the external debt of 18 billion meticais (EUR 227 million).

The document also indicates that the Mozambican state will pay 8.9 billion meticais (EUR112 million) interest on domestic debt.

The State Bugdet forecasts for next year the increase in debt burden by 1.2 percentage points to 3.4 percent of the Gross Domestic Product (GDP).

The bill submitted to parliament makes no mention of the EUR 2.2 billion in so-called hidden debt that the Mozambican government led by Armando Guebuza contracted between 2013 and 2014.

In addition to doubts about the revenue side, the Economist Intelligence Unit also raises reservations on the public expenditure side, saying that the government is unlikely to be able to borrow in the amount it expects.

“External debt obligations will exceed US$800 million in 2017, under current terms, but the budget only allocates US$246 million,” it says in the document, which also pointed to fiscal difficulties in relation to civil servants.

“The Government hopes to regain access to the International Monetary Fund in 2017 to alleviate balance of payments pressures, but the generous monthly subsidies and salaries are likely to conflict with the imposition of austerity by the Fund,” the analysts point out.

Source: Lusa