Mozambique: Government plans to reduce dependence on foreign aid

3 September 2008

Maputo, Mozambique, 3 Sept – The amount donors contributed to the Mozambique state budget may be reduced before 2011 as a result of the enlargement of the government’s tax base and more direct foreign and Mozambican investment, a government spokesperson said Tuesday in Maputo.

The Council of Ministers met in Maputo and analysed and approved the medium-term tax scenario for the 2009-2011 period. This is used as an economic policy and planning instrument that projects the resources that will be available for a specific period.

The scenario states that for 2008, the Mozambique state budget will have 90.197 billion meticais (US$3.75 billion), 45.7 percent of which is from internal contributions and 54.3 percent from donors.

For 2009, the budget will be 90.468 billion meticais (US$3.77 billion), 50 percent of which is from donors and the other half from internal resources. In 2011 the Mozambique state budget will total 107.692 billion meticais (US$4.48 billion), 55.7 percent of which is from internal resources and 44.3 percent from donors.

After the Council of Ministers meeting, government spokesperson Luis Covane said the government would be in a position to raise more revenues without overburdening current taxes.

“In addition to the already mentioned tax base enlargement, we have several investment projects, some of which are already being developed with others in the pipeline. This is the only way that we will have tax payers that will make our predictions possible,” he said.

The government spokesperson also noted that the government would pay special attention to a food production action plan in the tax scenario for 2009-2011. The government predicts that this action plan will absorb around 10 percent of the available resources in 2009 and 12.9 percent in 2011.

“Between 2009 and 2011 we expect economic growth to be 7 percent per year and that government revenues grow at an average annual rate of 0.5 percent of the gross domestic product (GDP).” Inflation will be 7 percent in 2009, 6.4 percent in 2010 and 6.2 percent in 2011,” said Covane.

Covane also mentioned other factors that would burden the Mozambique state budget in the period under analysis, such as the public administration salary reform currently underway, general elections in 2009, fluctuations “with a trend towards rising fuel prices in the international markets,” and the action plan for food production. (macauhub)