Standard Bank’s chief economist said today that a significant reduction in Mozambique’s public debt to GDP ratio is unlikely until near the end of the decade, hurting investment.
“It is unlikely that there will be a substantial reduction in Mozambique’s debt to gross domestic product (GDP) ratio until 2027 or 2028, when gas revenues should start to be more significant,” said Fáusio Mussá during a speech dedicated to this Lusophone country.
At the conference on investment opportunities in Angola and Mozambique, organized by Standard Bank in Lisbon today, Fáusio Mussá said that the ratio has been above 100 percent, which harms the interest of investors, since one of the macroeconomic variables most looked at by investors is this indicator that measures the amount of public debt in relation to the country’s wealth.
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This high debt scenario forces the country “either to finance itself abroad or to foster private sector participation,” added Standard Bank’s chief economist, noting that the financial assistance agreement with the International Monetary Fund is very positive not only for the amount of more than $450 million, almost the same in euros, but also for the confidence it imprints on foreign investors.
“The IMF has approved a program that went into effect in June, and that gives credibility to the reforms that the country wants to implement; the partners are now willing to provide general budget support, that is, without counterparts, as is the case of the World Bank, which has delivered $300 million to the government to use where it thinks it will have the most social and economic return,” said Fáusio Mussá.
This external support, added the economist, “is extremely important for a country that needs a bridge between future gas revenues and the waiting time until then, which needs to be managed.”
On the macroeconomic scenario, Fáusio Mussá said that Standard Bank foresees an average growth of 3.9 percent by 2025, which despite being significantly higher than in Angola and above population growth, “is much lower than necessary, because it would need to grow above eight percent to reduce poverty that affects 50 percent of the population.”
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