Maputo, 05 Sep (AIM) – The Mozambican government has pointed to natural disasters, public debt above sustainable limits, inflation and the performance of three companies in the State Business Sector, as the main fiscal risks for 2024.
According to the Fiscal Risks Report (RRF), produced by the Ministry of Economy and Finances, the public debt ratio, including contingent liabilities, fell from 109 per cent of Gross Domestic Product (GDP) in 2021 to 82 per cent in 2022.
“However, the country still has debt ratios above the sustainability thresholds recommended for low-income countries”, said the report. “Although the public debt/GDP ratio is decreasing, exchange and interest rates are the main fiscal risk factors for the increase in public debt servicing, which could jeopardize the primary balance”.
Exposure of the state business sector (SEE) is another risk identified for 2024. However, this risk “improved considerably” in 2022, reflected in the reduction of the debt stock from 22 per cent of GDP in 2021 to four per cent.
The national airline LAM, the fuel distributor Petromoc and mobile phone company TMCEL “continue to deserve greater attention from the state, due to their fragile financial situation”, says the document.
The document also points to natural disasters as a concern, given the risks of the 2023-2024 rainy season,, when the National Meteorological Institute (INAM) predicts the occurrence of the El Nino phenomenon, “which could lead to drought conditions in the south and part of the centre of the country, and high rainfall in the north.”
It also states that although inflation is “slowing down in 2023”, it will continue to “put pressure on public finances” in 2024, “and could reach an annual rate of 8.8 per cent compared to the seven per cent forecast” in the initial planning.
“It is expected that in the medium term the economy will continue to perform well, with average annual economic growth of 5.4 per cent. However, risks and uncertainties prevail, which could result in revenue being underestimated by an average of 0.9 per cent of GDP”, the report concludes.
The Fiscal Risks Report is a document that presents the main sources of fiscal risks and mitigation measures, “in order to reduce the exposure of public finances to unexpected events”.
(AIM)
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