5 December 2018

Mozambique: Assembly Passes State Budget for 2019

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Mozambique debt.

Maputo — The Mozambican parliament, the Assembly of the Republic, on Wednesday passed the state budget for 2019, by 132 votes to 74.

As is usually the case with budget votes, deputies of the ruling Frelimo Party voted en bloc to support the government proposals, while all deputies of the two opposition parties, the former rebel movement Renamo, and the Mozambique Democratic Movement (MDM) voted against.

Speaking at the end of the debate, Prime Minister Carlos Agostinho do Rosario said the target for GDP growth in 2019 is 4.7 per cent, and the government hoped to achieve this by focusing on "diversification of the economy, improving the business environment and implementing combined fiscal and monetary measures to stimulate the economy and keep inflation stable".

He stressed that the government's top priority remains agriculture "in all its value chain, with a view to increasing production and productivity, because of the direct impact this will have on the prices of basic goods and hence on reducing the cost of living".

In education, Rosario said, the new law on the education system, passed last month, will take effect next year "and will contribute to increasing the number of children who conclude primary education".

"We shall continue to hire more teachers, and to re-orient those currently teaching, depending on their academic qualifications and experience", he said.

The new law abolished the two stage system of primary education, and means that all primary schools must teach the first six grades of schooling. Seventh grade now becomes the first grade in secondary education.

Rosario rebutted opposition fears that the new system might throw teachers out of a job. "We repeat that, in the implementation of the new education law, no teacher will remain outside the system", he said.

The Prime Minister added that the government envisages the creation of 354,000 new jobs in 2019, in both the public and private sectors, "which will mostly benefit women and young people".

Many of these jobs are in the construction sector, in the building and rehabilitation of roads and bridges, and so are likely to be temporary.

The budget law will allow the government to issue loan guarantees for 151.25 billion meticais (2.48 billion dollars). Most of this is to cover a loan of two billion dollars which the National Hydrocarbon Company (ENH) must take out on the international markets to cover its participation in the Rovuma Basin LNG projects.

Opposition deputies objected to this and Silverio Ronguane of the MDM even called it "theft". He clearly did not understand the nature of a guarantee, and believed that two billion dollars was about to disappear from state coffers.

Rosario said the guarantee was needed in order to ensure the participation of the Mozambican state, through the National Hydrocarbon Company (ENH), in the natural gas liquefaction projects in the Rovuma Basin, off the coast of the northern province of Cabo Delgado.

The guarantee would facilitate the Final Investment Decision by the consortium headed by the US company Anadarko Petroleum, which intends to build gas liquefaction factories (known as "trains"), in the Afungi Peninsula in the Cabo Delgado district of Palma.

Once the Final Investment Decision was taken, work could begin on building the liquefaction plants. This would take about five years, and once the "trains" were built "the guarantee we issue will expire, and the undertaking becomes its own guarantee", said Rosario,

He believed the risk involved in issuing such a guarantee was minimal. "With the experience of the international companies involved in this project, the likelihood of any non-compliance which could lead to activating the guarantee is very small", said Rosario.

Finance Minister Adriano Maleiane, said all the partners in the Anadarko-led consortium, including ENH, have created a Special Purpose Vehicle (SPV) necessary to organise the project finance, and all the partners must provide guarantees. So if the Mozambican state wishes to be a partner in the gas liquefaction taking place in its own territory, then it must provide ENH with a guarantee.

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