Mozambique economic outlook improving but risks remain

The Eaglestone consultancy said last week that the outlook for the Mozambican economy is more favourable, but noted the permanence of some risks, including violence in the north and the pace of implementation of reforms.

In an analysis of the Mozambican economy, sent to clients and to which Lusa had access, the analysts wrote that, “the government is focusing on improving economic activity in the country, along with the reforms implemented to help increase public revenues and measures to try to contain spending, to ensure the sustainability of public finances”.

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Sharing the government’s optimistic view of economic growth for this year and next, accelerating compared to 2022, Eaglestone analysts warn, however, that “there remain some risks to the country’s prospects, including adverse weather events and the fragile security situation.

Therefore, they point out that “fiscal consolidation and reducing the budget deficit remain crucial to reduce the country’s public debt ratio in the medium term,” and point out that “reducing exchange rate volatility is also important, especially given that almost three-quarters of the public debt is external debt and is denominated in foreign currency.

In the analysis, Eaglestone also warns, “We will see whether the authorities will take advantage of the better times ahead to continue to advance with the structural reforms needed to promote more sustained economic growth and improve the country’s resilience to external shocks.”

The draft state budget for 2023 includes a 21.5% rise in public revenues and a rise in state spending of 4.8% compared to what was set out in last year’s budget.

The document, which was approved by the Mozambican parliament in December, also outlines a reduction of the deficit to 8.7% of gross domestic product, falling to 115 billion meticais (€1.8 billion), a drop of 5.2 percentage points from the estimate for 2022.

Reducing the deficit is one of the commitments made by the Mozambican government to the International Monetary Fund (IMF) under the financial assistance programme of US$470 million (€446 million) until 2025.