16 January 2014

Mozambique: Mozambican Growth Remains Robust - IMF

Maputo — The International Monetary Fund (IMF) considers that the growth of the Mozambican economy remained strong in 2013, recovering quickly from the floods that occurred at the beginning of the year.

Addressing a Maputo press conference on Thursday, the IMF Resident Representative in the country, Alex Segura, said that was the assessment of the IMF team carrying out the first review of the three year Policy Support Instrument (PSI) approved in June 2013.

The IMF claims that the PSI is an instrument which “supports low-income countries that do not want—or need—Fund financial assistance but seek to consolidate their economic performance with IMF monitoring and support”.

“It is now known that the GDP of Mozambique grew by 7.1 per cent in 2013”, said Segura. “That's a very high level of growth, one of the highest in sub-Saharan Africa”.

He noted that inflation remained “relatively stable”. Over the year the average 12 monthly inflation rate was 4.2 per cent, below the government's medium term target of 5.6 per cent.

Segura added that tax collection also beat the government's targets - mainly due to the capital gains tax paid on transactions involving shareholdings in the Rovuma Basin, where massive deposits of natural gas have been found. These one-off payments amounted to 624 million US dollars in 2013, which is four per cent of GDP. But even without capital gains tax, revenue collection was “satisfactory”, said Segura.

Despite the government's guarantees for the 850 million dollar bond issue by the Mozambican Tuna Company (EMATUM), public indebtedness on commercial terms remains below the limit fixed in the government's programme with the IMF.

Segura said there had been “progress in structural reforms, particularly in the management of public finance, banking supervision and the payments system of the central bank”.

But there had also been delays in some of these reforms. “The Integrated Investment Plan was not approved on time”, said Segura.

“It is lacking in specifics, linkages with the state budget and a debt sustainability analysis”.

He believed that perspectives for the immediate and the medium terms remain strong “based mainly on coal exports and on investments in the natural gas industry”.

Segura forecast an acceleration in the growth rate to 8.3 per cent, based not only on mineral resources, but on a strong recovery in agriculture. Over the next five years he expected growth to continue at a rate of around eight per cent a year “sustained by the continual increase in coal production and exports, the construction of the natural gas liquefaction plant, and vigorous growth in transport, communications and construction.

Public expenditure is set to increase sharply in 2014, rising from last year's figure of 36.3 per cent of GDP to 40 per cent. Segura said this would result from using the capital gains tax collected in 2013 (which he suggested would help finance the October general elections), and from the inclusion in the state budget of the non-commercial operations of EMATUM.

Risks over the short and medium term, Segura said, included the impact of climate change, fluctuating international commodity prices, and a potential reduction in foreign aid.

Domestic risks included possible delays in the improvements in the railways and ports so essential for the logistics of coal exports, and in expanding the electricity grid.

As for the insecurity arising from clashes, mostly in the central province of Sofala, between gunmen of the former rebel movement Renamo and the Mozambican defence and security forces, Segura brushed it aside as not forming part of the IMF's projections.

“Our projections and analyses are based on a system of political and social stability. That is our base scenario”, he said.

But he recognised that insecurity could lead to problems in the supply of goods and services, leaded to “localized price rises”. It was therefore necessary “to avoid this type of situation which can have a negative effect on the people affected”.

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