Mozambique: IMF forecasts “minimal effects” for Mozambique as a result of xenophobic violence in South Africa

3 June 2008

Maputo, Mozambique, 3 June – The outbreak of xenophobic violence in South Africa will have “minimal effects on the Mozambican economy, the International Monetary Fund representative in Mozambique, Felix Fisher said in Maputo Monday.

Mozambique has around 50,000 workers in South Africa’s gold mines and via which it receives some US$80 million in remittances.

Saying that the damage caused by the violence on the Mozambican economy had not yet been measured, Fisher noted that the remittances sent by emigrants were of great importance to the national economy.

“The IMF does not yet have an estimate of what the damage will be,” he said, adding he was convinced that the impact on the balance of payments would be small.

The fact that growth of the Mozambican economy is driven by other indicators – such as support from international donors, domestic and foreign investment, exports of raw materials and the rise in revenue from sectors such as tourism – provides guarantees that the effect of the situation in South Africa will be marginal, Fisher said.

For example, over half of the State Budget is provided by international donors, as Mozambique is considered to closely follow the economic policies of the World Bank and International Monetary Fund.

Speaking about the effect on Mozambique of the international fuel and food crisis, Fisher said that the country was in “one of the best positions to resist shocks.”

The fact that Mozambique has international net reserves able to cover imports for 8.2 months and the existence of instruments capable of deadening the impact of the crisis on the poorest people provide the company with capacity to resist, Fisher said.

In order to continue on a “good path” the Maputo monetary authorities needed to resist the temptation of extending fuel subsidies to other classes of consumer, limiting them to public transport, which is used by the poorest sections of the population. (macauhub)