Mozambique lowers growth forecast over drought, donor withdrawal

The Mozambican government has revised downwards its growth forecast for 2016 to 4.5 percent from the initial 7 percent due to drought and the suspension of direct budgetary support from donors.

Economy and Finance Minister Adriano Maleiane said Friday the government was therefore going to introduce spending cuts on capital expenditure but stressed that the cuts will not affect key social areas such as education, health and social affairs.

He explained that the revised state budget is needed due to alterations in the macroeconomic environment.

In particular, he pointed to adverse changes in the national and global economy such as the fall in the price of primary commodities, the reduction in foreign direct investment, the suspension of direct budget support by donors, military tensions, drought and floods.

Other negative factors were the worsening of the fiscal deficit from 10.2 percent to 11.3 per cent of Gross Domestic Product and the increase in the cost of servicing debt as a result of the deterioration of the value of the national currency, the metical, in relation to the U.S. dollar.

"All of this means that we have to revise the budget to accommodate these changes so that the public administration can function normally," Maleiane said.

He added that the government is aware of the need to establish policies that are conducive to private sector development through improvements to the business environment.

In addition, the government would take further measures to ensure the economy grows at a rate of 5.2 percent next year, he said.

The group of 14 donors and funding agencies who provide direct support to the Mozambican budget suspended that financial aid in May following revelations of 1.4 billion U.S. dollars worth of undisclosed government guaranteed loans. Enditem