Mozambique’s economic week was marked by updates in several key areas, including the growth of domestic indebtedness, inflation forecasts until the end of the year, the performance of exports in the first half of the year and progress in the fight against money laundering.
The Bank of Mozambique (BoM) reported that the state’s domestic debt increased by 95.7 billion meticals (1.4 billion dollars) in 2024, currently totalling 408.1 billion meticals (6.3 billion dollars). This amount represents 26.5 per cent of the Gross Domestic Product (GDP), compared to 18.1 per cent in December 2020.
According to information from the central bank, between September and November this year, domestic debt increased by 5.5 billion meticals, signalling growing pressure on public finances.
According to the Ministry of Economy and Finance, the increase in interest rates associated with Treasury Bills and Bonds has made public financing more expensive. The weighted average interest rate on government loans rose from 5 per cent in 2021 to 6.5 per cent in 2023, reflecting an increase of 150 basis points over the period.
The authorities emphasised that domestic debt issues continue to play a crucial role in attracting financial resources. However, they emphasised that the pace of growth of this debt poses challenges to long-term sustainability, particularly in a scenario of high global interest rates.
Inflation may rise by the end of the year
The BoM, in its most recent Economic Situation and Inflation Outlook (CEPI) report, pointed to a possible acceleration in inflation in Mozambique, with estimates of 3.14 per cent by December, compared to the 2.68 per cent recorded in October.
According to the document, post-election tension has led to restrictions on the supply of goods and services, directly influencing consumer prices.
The general elections of 9 October, which declared Daniel Chapo President with 70.67% of the vote, continue to provoke demonstrations in various regions of the country. The opposition, led by Venâncio Mondlane, is contesting the results, and recent protests have affected economic activity in Maputo and Ressano Garcia.
Despite the unstable political scenario, the governor of the BoM, Rogério Zandamela, reaffirmed the economic growth projections of 5.5 per cent for 2024, considering that the impact of the instability will depend on the duration of the tensions.
Exports Grow with India Leading Purchases
BoM data on foreign trade shows that India was the biggest destination for Mozambican exports in the first half of 2024, absorbing 19.8 per cent of sales, valued at 48.8 billion meticals (763.2 million dollars).
Among the main products exported to India are natural gas, mineral coal, dried vegetables and cashew nuts. South Africa was the second largest market, with 16 per cent of exports (39.5 billion meticals), while China came third, accounting for 12.2 per cent (30.1 billion meticals).
In total, Mozambican exports in the period totalled 246.3 billion meticals, an increase of 3.2% on the same period in 2023. On the other hand, imports fell by 2.6%, totalling 269 billion meticals.
Progress in Combating Money Laundering
Mozambique improved its position in the Basel AML Index 2024, moving from 6th to 12th place among the countries with the highest risk of money laundering. The country’s risk score was reduced from 7.88 to 7.15, according to the index drawn up by the Basel Institute on Governance.
The progress is attributed to the strengthening of supervisory mechanisms and the implementation of international transparency standards. The report notes that 25 of the 40 recommendations of the Financial Action Task Force (FATF) are currently ‘in compliance’.
Despite the improvements, the country remains among the 15 territories most vulnerable to money laundering, according to the index. A decision on its removal from the FATF grey list is expected in the first quarter of 2025, depending on compliance with the pending recommendations.
Text: Felisberto Ruco
