Mozambique orders ten more locomotives from India
O País / Economist Constantino Marrengula backs economic restructuring to make up for lack of IMF support
The International Monetary Fund (IMF) reiterated last Friday that it would not resume support for Mozambique in 2018 if the gaps in the audit report on hidden debts were not clarified. Reacting to the situation on Monday, Mozambican economist Constantino Marrengula said that the pronouncements were not encouraging, but given the expectations of economic recovery he believes it is time for the country to restructure itself as an economy, setting new priorities and allocating public expenditure better.
“Now is the time to think globally about fiscal reform to make the country more autonomous. Because we still have a lot of fiscal space for taxation that is not being taken advantage of,” he said, adding that there are still areas to be optimised. “I continue to think that we have to look at this moment as an opportunity to start internal reform processes, because there is still capacity within the country to stand on our own two feet,” he said.
Marrengula considers that the tax base is wide and should be further explored, though making this happen will be a test of the government’s ability to manage the process. “It will depend very much on the ability of the government to find sustainable, long-term alternatives. It will depend on what is going to happen in the Rovuma basin, from the point of view of the negotiations that will take place and the possibilities for capital gains”.
Another possible way to widen the tax base to cover the budget deficit, he argues, is for the Tax Authority to clamp down on companies that evade tax authorities, signalling the Bank of Mozambique’s importance in this process. “Inflationary financing will continue to occur, because in the absence of public resources, we will need the central bank’s response. It has to find ways to ensure that the economy works without hiccup.”
Although he believes in the possibility of economic management without external support, Marrengula warns of the risks that the government runs. “If there are no funds for investments, the government may not be able to honour its commitments and this will have consequences such as bankruptcies and unemployment.”
Regarding IMF conditions for resuming support to the country, Marregula said that, since the audit was not the only condition imposed, the government should find alternatives to deal with the situation, and also to face the possible consequences. Lacking this, fiscal reform was the best alternative, he said.
The IMF’s refusal to provide support raises the issue of the country’s credibility vis-à-vis other international donors, particularly in the West. If needs be, the country could resort to financing from economies that are not directly linked to the IMF such as China’s, the economist notes.
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