12 September 2018

Mozambique: Government Plans Growth of 4.7 Per Cent in 2019

Maputo — The Mozambican economy should grow at a rate of 4.7 per cent next year, according to the government's Economic and Social Plan for 2019, approved by the Council of Ministers (Cabinet) on Tuesday.

The annualised growth rate in the second quarter of 2018 was 3.4 per cent, up from 3.2 per cent in the first quarter.

The government spokesperson, the Deputy Minister of Mineral Resources and Energy, Augusto Fernando, told reporters that the highest rate of growth - 14 per cent - is expected in the mining industry, followed by fisheries (six per cent) and agriculture (5.5 per cent).

As for prices, the target for 2019 is that the average annual rate of inflation should be no higher than 6.5 per cent. According to figures released on Monday by the National Statistics Institute (INE), the average annual inflation rate in the 12 months up to August 2018 was 5.04 per cent. Inflation in the first eight months of the year was 2.68 per cent.

Fernando said the government expects commodity exports in 2019 to reach 5.16 billion dollars, and that the country's net international reserves will be around 3.1 billion dollars. According to the Bank of Mozambique, the reserves stood at 3.156 billion dollars in June this year - enough to cover seven months of imports of goods and non-factor services, excluding the transactions of the foreign investment mega-projects.

The 2019 budget, said Fernando, envisages expenditure of 324 billion meticais (about 5.4 billion US dollars). This expenditure includes six billion meticais for the presidential, parliamentary and provincial elections scheduled for October 2019.

But the prediction for state revenue in 2019 is only 244 billion meticais. If achieved, this would be an increase of 22 billion meticais on the revenue expected for this year. Exactly the same increase is envisaged for expenditure.

The projected deficit is thus 80 billion meticais - the same as for this year. Fernando told reporters the deficit would be covered by "domestic resources" as well as by foreign grants. But Mozambique's traditional donors have ceased providing direct budget support, and have made it very clear that, if this form of aid ever resumes, it will depend on a full explanation of what happened to the over two billion dollars of government guaranteed loans taken out from European banks in 2013 and 2014, by the security-related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management).

The "domestic resources" mentioned refer to the high interest bearing treasury bonds that the government regularly issues.

The plan and budget must now be submitted to the Mozambican parliament, the Assembly of the Republic, where they likely to be debated in December.

Fernando also announced that the government intends to increase the tolls charged for using the country's main road bridges. This was necessary, he said, in order to ensure maintenance of the bridges.

"The users of these infrastructures should bear the costs of maintenance", he insisted. The money raised through tolls could also go towards expanding the road network and rehabilitating other road facilities.

He said the list of new tolls would soon be published. The only example he gave was the bridge over the Limpopo River at Xai-Xai, capital of the southern province of Gaza. Currently, motorists pay only ten meticais (17 US cents) to drive across the bridge. This will rise by 150 per cent to 25 meticais.

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