Mozambican economy

The Mozambican economy is prone to risks and uncertainties caused by the terrorism that has been plaguing the northern province of Cabo Delgado, a possible increase in Covid-19 infections, natural disasters and the intensification of the Russian attack against Ukraine, leading to rising global food and fuel prices. The IMF resident representative in Mozambique, Alexis Cirkel, gave this overview on Thursday in Maputo, when he presented the IMF Regional Economic Outlook for Sub-Saharan Africa. At least one of Cirkel’s concerns seems misplaced: far from accelerating, the number of Covid-19 infections has sharply declined in recent weeks, and there is no likelihood that the government will decree any form of lockdown. The mass vaccination campaign against Covid-19 has reached over 92 per cent of all Mozambicans over the age of 18, so that, even if the country is hit by a fifth wave of the pandemic, few people are likely to be hospitalised, let alone die. Under the new programme recently negotiated between the Mozambican government and the IMF, Cirkel said, about 470 million will become available to provide financial assistance for reforms and policies implemented by the Mozambican government. He warned that “reforms” must remain a priority, especially the diversification of the economy and investment in human capital.

 “The IMF programme with the government of Mozambique aims to support some of the necessary reforms, such as strengthening sustainable macro-economic stability consistent with inclusive and sustainable growth leading to the reduction of poverty and inequality”, he stressed. Cirkel said that Mozambique will suffer indirectly from the Russian invasion of Ukraine, largely because the war will provoke increased fuel and grain prices. Both Russia and Ukraine are major wheat producers, but the Russian blockade of the Ukrainian Black Sea ports has dramatically cut Ukrainian grain exports. The price of the wheat imported by Mozambique has already risen this year, and Cirkel noted that in several provinces, bakers are increasing the price of wheat. But Cirkel believed the main risks to the Mozambican economy were the terrorist violence in Cabo Delgado, and natural disasters. “Terrorism increases fiscal pressures”, he said, “delays the natural gas projects, and increases poverty and inequality”. As for the IMF’s macro-economic forecasts, Cirkel said he expected the GDP to grow by 3.8 per cent this year, rising to five per cent in 2023 and 8.3 per cent in 2024. The IMF believes that Mozambican inflation will reach nine per cent this year, falling to seven per cent in 2023.