Mozambique central bank warns of risks of instability

Political instability and insecurity “do not help macro-economic stability if they last for any length of time”, warned the spokesperson for the Bank of Mozambique, Waldemar de Sousa, on Tuesday.

At a Maputo press conference, Sousa was optimistic that the targets for a high growth rate and low inflation this year will be met – but admitted that unforeseen circumstances could throw the economy off course.

The central bank’s economic forecasts have “a level of tolerance of risks which must not be exceeded”, he said. However, he thought that the forecasts would prove accurate up to the end of the year, “despite unexpected risks” – a reference to the clashes in the central province of Sofala between the Mozambican defence and security forces and gunmen of the former rebel movement Renamo.

The most serious economic impact of the clashes has been to hinder traffic along the main north-south highway. Vehicles can only travel with a military escort along 100 kilometres of the road, between the Save river and the small town of Muxungue.

Sousa pointed out that “free circulation of people and of goods is essential for the tranquility of businesses”.

As for the country’s foreign debt, Sousa admitted that this has shifted “from low risk to medium risk, but it is not yet at the levels of alert”. He put debt service payments at an average of 11 million US dollars a month.

“As the debt grows, so our capacity for debt analysis and management should also grow”, he stressed.

Turning to foreign direct investment, Sousa said this had amounted to 5.2 billion dollars in 2012, and 3.6 billion dollars in the first half of 2013. The only African country to receive more foreign investment than Mozambique in 2012 was Nigeria.

The vast majority of this investment – 91 per cent – is directed to mineral resources. In 2012, 43 per cent went to coal, 38 per cent went to natural gas, and 10 per cent to other mining activities.

Four per cent of foreign direct investment went into transport and communications. Agriculture, on which most Mozambicans still depend for their living, only received two per cent – the same as real estate.

Post published in: Africa News

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