Central Bank chief says Mozambique has high debt, low savings

Rogério Zandamela, Mozambique’s Central Bank head, says the country has built up big debt without enough savings.

He spoke at Maputo’s Polytechnic University, stressing the need for financial caution.

Zandamela highlighted that the country faces structural deficits. These make it hard to manage money and respond to frequent crises.

He pointed out that Mozambique is pushing for new reforms like a unified salary table. However, these changes lack proper funding.

“People keep asking when reforms will happen. They are tired. With more funds, the benefits would be clear,” he said.

On July 14, the International Monetary Fund (IMF) called for reducing Mozambique’s wage bill.

They want the country to focus on food security and poverty relief instead. On July 6, the IMF confirmed a US$60.6 million funding boost for Mozambique.

According to the IMF, the country’s economy is improving. Natural gas projects are playing a big role.

According to the IMF, Mozambique is taking steps for better money management in 2023.

This year, the IMF predicts a 7% growth in Mozambique’s GDP, up from 4.2% last year. It also expects inflation to drop from 10.3% to 6.7% by year’s end.

Finally, the debt-to-GDP ratio should decrease, going down to 89.7%. This is an improvement from the 95.5% ratio last year.

Context

Mozambique has faced economic challenges for years. Once a Portuguese colony, it gained independence in 1975 but faced a long civil war.

This drained resources and left a fragile economy. The country is rich in natural resources like gas and coal.

However, it has struggled to turn these into sustainable growth.

International loans and aid have often been the go-to solution. Yet, this has increased the country’s debt burden.

The central bank’s recent statements signal a need for change, aiming for a more balanced economy.