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BoM: Mozambique Continued to Rely on Foreign Savings to Finance its Needs in 2022

BoM: Mozambique Continued to Rely on Foreign Savings to Finance its Needs in 2022

The Mozambican economy continued to resort to foreign savings in 2022 to finance its consumption and investment needs.

According to figures from the annual balance of payments bulletin, published recently by the Bank of Mozambique (BoM) and to which the DE had access, Mozambique’s net external financing needs, in relation to gross domestic product (GDP), rose by 14.6 percentage points (pp), rising from 22.4 percent in 2021 to 37 percent in 2022.

According to the document, contributed to this result, the deterioration of the current account (CC) deficit, by 74.8%, setting it at US$6.2 billion (equivalent to 37.4% of GDP), combined with the reduction of the surplus balance of the capital transfers account by 5.7%.

“The deterioration of the deficit of the CC essentially reflects the increase by more than 100% of the negative balance of the goods account, justified by the increase in imports, by large projects (GP), by 4.6 billion dollars, due to the arrival of the floating platform Coral Sul, FLNG (floating liquefied natural gas) in the Rovuma basin. In turn, the contraction in the surplus balance of capital transfers was due to a decrease in donations for investment projects received by the Central Administration,” the report explained.

The report also noted that the primary income account (which includes payments and receipts of income from factors such as labour or capital) also contributed to the increase in the CC deficit, by increasing its negative balance from US$339.9 million to US$924.2 million (5.5 percent of GDP), as a result of increased capital repatriation, in the form of dividends and interest on loans, by foreign direct investment (FDI) companies, particularly GPs.

On the other hand, the deficit in the services account improved by 16.6% to US$ 1.4 billion (equivalent to 8.6% of GDP), reflecting the reduction in the contracting of technical assistance services by the GPs, associated with an increase in net tourism revenue of more than 100%. In addition, “net current transfers recorded a surplus of US$1.1 billion (55.9% more than in 2021), essentially due to the increase in net receipts from the private sector and the Central Government.

Meanwhile, in 2022, the financial account, the report said, recorded inflows of US$5.6 billion (33.5 percent of GDP), representing an increase of US$2.9 billion compared to the same period of 2021, as a result of an increase of over 100 percent in financial flows in the Other Investment category, determined by the combined effect of the reduction in net acquisition of financial assets and the increase in foreign debt, both in the form of trade credits, undertaken by GPs.

In this sense, “the joint deficit of the CC and capital was greater than the inflows in the financial account, a fact that contributed to the recording of an overall balance of negative BoP of 584.1 million dollars, which in turn was financed with recourse to the attrition of reserve assets of the monetary authority, culminating with the balance of gross international reserves of 2.8 billion dollars.”

Overall, the bulletin said that Mozambique’s debit balance to the outside world, measured by the International Investment Position (IIP), deteriorated by 9.8 percent to US$68.9 billion, due to the increase in the foreign liabilities position by 7.5 percent to US$83.9 billion, combined with a reduction of assets held abroad by 2 percent, totalling US$14.9 billion.


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