Mozambique 8 July: Boat debts could still sink new budget

Good afternoon. Mozambique’s government has finally brought its forecasts for economic growth this year into line with outside observers – meaning that the budget deficit for 2016 is likely to increase as a percentage of GDP despite new measures to cut spending by 10%.

Our detailed article on the announcements made yesterday by the government is free to read. To get full access to Zitamar’s breaking news and analysis, contact our subscriptions team at subscriptions@zitamar.com for more information.

FREE TO READ: Mozambique unveils austerity plan as economic prospects darken

The headline facts are that the government agrees with the IMF’s projection of 4.5% GDP growth, and expects inflation to go over 16% this year. Reserves of foreign currency are looking perilously low, projected to end the year at half the level the government originally thought.

At times like these, sectors with the potential to export become particularly important. One of those is the electricity sector – and utility EDM is going through a process of internal renewal with the aim of making Mozambique an “energy hub for Southern Africa”.

SEE: Mozambique electric company kicks off recruitment drive for top executives

EDM has already chalked up a number of successes in getting power plants online in recent years. UK-listed Ncondezi Energy hopes its project can be one of the next, having brought Shanghai Electric Power on board. The Chinese company plans to use Mozambique as its first foothold to expand across the region.

SEE: Chinese power co kicks off African expansion with Mozambique coal-fired plant

India is also looking at Mozambique as a “gateway” to Africa, and Maputo was Prime Minister Narendra Modi’s arrival point this week on his first visit to mainland Africa. During his flying visit, accords were signed on agricultural exports and combatting drug trafficking – with further plans for co-operation announced.

SEE: Mozambique a ‘gateway’ for Indian investment in Africa, says PM Modi

Finally, the Mozambique government is hoping its plans to balance the books this year are not thrown off course by Mozambique Asset Management’s inability to repay its debts. If the government guarantee is eventually called, the country could be forced into a default.

SEE: Talks continue over Mozambique Asset Management’s unpaid debt

Have a great weekend.

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