Deepened economic crisis of Mozambique

The African Development Bank (AfDB) has warned of deepened economic crisis if Mozambique does not restructure debt and restore investor confidence.Mozambique’s debt position has led to a cut in expected growth to 4.5 per cent this year and five per cent in 2020.

“Mozambique’s debt is distressed, a failure of the debt restructuring agreement and restoring investor confidence could deepen economic hardship and slow growth,” write AfDB analysts in the African Economic Outlook, presented today in Abidjan, Côte d’Ivoire.

The outlook further states that “the strong dependence on debt, mainly domestic, has not only alienated private investment, but also led to the debt problem”.

Thus “the main policy priorities should include an active debt management strategy to restore confidence and…stimulate economic growth and job creation”.

“The main risks to economic growth include price increases for major imports, such as fuel and food, and economic hardships in South Africa, the second largest export destination,” the outlook states.

Last year, economic performance was expected at 3.5 per cent, “which is a dramatic decline compared to the average of seven per cent from 2004 to 2015”, warns the AfDB, which attributes this decrease “to the fall in public investment and a reduction of 23 per cent in foreign direct investment between 2015 and 2017”.

For this and next year, the Bank estimates a GDP growth of 3.5 per cent and five per cent, “driven by agriculture, which continues to recover from the drought of 2015-2016, and by the extractive industries, with exports of coal to continue to expand”.On Mozambique, the link between the Bank’s priorities and Government policies is highlighted.It emphasises that national policies are in line with the five main priorities of the AfDB, known as High 5: Feed Africa, Industrialize Africa, Integrate Africa and Improve the Quality of Life, in addition to Lighting Africa, the latter being the only part where the outlook does not give examples of measures Mozambique is undertaking.