Africa-Press – Mozambique. A Financial Stability Report recently published by the Bank of Mozambique reveals that public debt contracted by the government reached 948.7 billion Meticais in 2020, 96.7% of Gross Domestic Product (GDP) of 982.4 billion Meticais by the end of last year.
The central bank reports that the stock of public debt has increased considerably over the past year. In December 2019, it stood at 754 billion Meticais, but by the end of the following year it had risen 26% to the above-mentioned 948.7 billion Meticais.
The Bank of Mozambique report shows that, in 2019, the debt stock grew from 78.8% of GDP to 96.7%. The report details that 752.7 billion Meticais of that amount is external debt (including the ‘hidden debts’), and 195.9 billion Meticais of it domestic debt stock.
The central bank says that the continuous growth in public indebtedness in 2020 was caused by the increase in state expenditure which was not offset by tax revenues, which fell in line with the performance of economic activity.
“The greatest pressure on the public expenditure side resulted from public sector spending, with a view to containing the Covid-19 pandemic and the weather effects, as well as from military spending. The sharp fall in economic activity influenced the level of tax revenue collection, which suffered a reduction of 14.6%, which was to be expected, taking into account the forecast for the lower revenue limit, contained in the 2020 State Budget (Law 3/2020 ) as well as in the amendment (Law 11/2020),” the report enumerates.
As a result of this unsustainable indebtedness, the central bank indicates that, in the period under review, the international market’s confidence in Mozambique remained at substantial risk levels, with the country continuing to experience restricted access to international financial markets, which may put at risk the domestic financial market, in terms of exchange and interest rates.
A report released in April by the International Monetary Fund (IMF) forecasts that Mozambique will continue to borrow to meet public expenditure, and that debt may reach 125.3% of GDP, which could rise by one percentage point in 2022.
By
Evaristo Chilingue
