Mozambique's state budget is moving (74.8%)

Mozambique has, in recent years, sharply reduced its dependence on foreign aid to finance its public expenditure, Prime Minister Carlos Agostinho do Rosario announced in the country’s parliament, the Assembly of the Republic on Wednesday.In the recent past, Mozambique depended on foreign grants and loans to cover about half of its annual budget. But the draft budget for 2016, unveiled by Rosario and Finance Minister Adriano Maleiane, is mostly financed by domestic taxation. Rosario said that domestic resources cover 74.8 per cent of total planned expenditure, and foreign aid 25.2 per cent. “This”, he said, “bears witness to the commitment of our government to increase, gradually and continually, the contribution of domestic resources in financing public expenditure”.The total expenditure proposed in the budget is 261.1 billion meticais (about 5.12 billion US dollars, at current exchange rates). Domestic revenue is expected to reach just over 181 billion meticais, leaving a deficit of 80.1 billion meticais.In nominal terms, the expenditure in the 2016 budget is 15.3 per cent higher than the 2015 expenditure, but as a percentage of GDP it is the same, at 38.1 per cent.The deficit will be funded by 47.6 billion meticais in foreign loans, 19.7 billion meticais in foreign grants, and 12.8 billion meticais in domestic debt (though the issuing of treasury bonds). The priority social and economic sectors for the fight against poverty account for 72.9 per cent of planned expenditure, once debt servicing and financial operations are excluded. 22.9 per cent of spending goes on education, 10.8 per cent on health, and 23.1 per cent on infrastructures. The latter breaks down into 16.8 per cent on roads and bridges, 4.6 per cent on water supply, and 1.8 per cent on mineral resources and energy.9.5 per cent of expenditure is allocated to agriculture and rural development, 4.3 per cent to labour and social welfare, and 2.2 per cent to the judicial system.

This marks a significant increase in the resources allocated to the priority sectors, which only received 61.6 per cent of total expenditure in the 2015 budget. The largest increases are in the allocation for roads, rising from 9.1 to 16.8 per cent, and for agriculture, up from 7.2 to 9.5 per cent. Debt servicing in 2016 is put at 10.1 billion meticais, which is 1.5 per cent of GDP, up from 1.2 per cent of GDP spent on debt servicing this year. Most of this – 7.2 billion meticais – pays the interest on the domestic debt, while slightly less than three billion meticais services the foreign debt. One snag here is that the budget was drawn up before the sharp depreciation of the metical in November. Since the foreign debt is mostly denominated in dollars, expressing it in meticais depends on the exchange rate – which was 42 meticais to the dollar at the end of October, but is now about 51 meticais to the dollar.