Mozambique’s top priority: Debt sustainability , says EIU

Login

Register

http://www.clubofmozambique.com/

Mozambique’s top priority: Debt sustainability , says EIU

1:55 CAT | 11 Apr 2016

The Economist Intelligence Unit (EIU) considers that the Mozambique government’s main political priority must be to maintain the sustainability of the public debt, which rose from less than 40 percent of GDP in 2012 to almost 70 percent this year.

“Following too-high expansionary policies in recent years, the short-term priority of the Government must be to preserve debt sustainability,” the experts of the economic analysis unit of British magazine The Economist write.

In its economic analysis for investors, analysts write that “pressures on the balance of payments, which emerged in late 2015 as a result of the rapid accumulation of debt in 2013 and 2014, a sharp drop in foreign investment and a fall in commodity prices, led the government to contract a loan of US$286 million from the International Monetary Fund” at the end of last year.

According to IMF analysis, Mozambique’s public debt increased from 39.9 percent of GDP in 2012 to 50.9 percent the following year, increasing to 56.6 percent in 2014 and to 73.6 percent in 2015, settling slightly lower at 69.5 percent this year.

The Economist’s emphasis on debt sustainability comes at a time when the debt issue is again in the news in Mozambique, after it was made public that public company Proindicus took out an undisclosed US$266 million loan from international investors in 2013.

Last week, Standard & Poor’s lowered the country’s external debt rating as a result of a debt relief operation concerning the Ematum company’s sovereign debt.

“Our forecast is that the government will honour its debt obligations, although additional pressure on the price of raw materials, operational disturbances in the mining industry or a reduction above the forecast of the metical could further exacerbate liquidity risks,” the EIU says, noting that the Government’s efforts to reschedule the US$850 million in debt taken on by Ematum in 2013 “will remove some short-term pressure on the balance of payments”.

Source: Lusa