It seems that there is some form of catastrophe every time Mozambique looks as though it could finally be realising its economic potential.Just as the long-awaited development of the gas fields in the north started building up steam and generating freight volumes, along came Covid. The way the World Bank sees it “the Covid-19 (coronavirus) pandemic reached Mozambique at a weak moment in its economic history, as the country attempted to recover from two major shocks: the hidden debt crisis and the devastating effects of cyclones Idai and Kenneth in 2019.“In 2016, Mozambique’s track record for high growth was disrupted when large, previously unreported external borrowing came to light. “The revelation of undisclosed debt dented confidence in the country, increased debt levels, and more than halved the average rate of growth. “In 2019, Cyclones Idai and Kenneth caused massive damage to infrastructure and livelihoods, further lowering growth and wellbeing of the population. “The pandemic presents a further setback to the country’s economic prospects. “The Covid-19 crisis will have a heavy impact on economic activity as social distancing and travel restrictions (domestically and globally) affect demand for goods and services. “At the same time, reduced demand and prices of commodities are slowing the pace of investment in gas and coal, two key industries for Mozambique. “With this, growth is expected to decline to 1.3% in 2020, down from a pre-Covid forecast of 4.3%, with significant downside risks,” according to the World Bank analysis. It is supported by FocusEconomics, which predicts that the economy will contract for the first time in nearly three decades this year due to the pandemic’s fallout. Exports, especially of coal and aluminium, are set to decline amid subdued foreign demand.It is not, however, all doom and gloom.“That said, output is expected to rebound solidly next year as activity gradually recovers,” adds the report by the FocusEconomics panellists.Mozambique has received some support from the International Monetary Fund (IMF), which has approved a disbursement under the Rapid Credit Facility (RCF) of around US$309 million to help it meet urgent balance of payment and fiscal needs stemming from the Covid-19 pandemic.Announcing the funding, IMF deputy managing director and chair, Tao Zhang, said Mozambique was expected to be significantly affected by the Covid-19 pandemic, dashing prospects of a nascent economic recovery following two powerful tropical cyclones that had struck in 2019. “The IMF’s emergency financial support under the Rapid Credit Facility, along with the additional donor grant financing it will help to catalyse, will contribute to addressing Mozambique’s urgent balance of payments needs generated by the pandemic. “The authorities’ immediate priority is to limit the impact of the pandemic and preserve macroeconomic and financial stability. “Higher health spending and measures to protect the most vulnerable in the society and support micro-businesses and SMEs are being enacted.“Once the pandemic eases, it will be critical to resume fiscal consolidation and strengthened debt management and transparency to ensure that public debt remains sustainable. It will also be important to implement structural reforms to support inclusive and sustainable growth,’’ he said.T
INSERT: "The Covid-19 crisis will have a heavy impact on economic activity as social distancing and travel restrictions (domestically and globally) affect demand for goods and services." – The World Bank
