Mozambique: Assembly Passes Amended 2020 Budget

Maputo — The Mozambican parliament, the Assembly of the Republic, on Wednesday passed the first reading of an amended state budget for 2020, which increases expenditure by 8.3 per cent, rising from 345.4 billion to 374.1 billion meticais (from 4.73 to 5.12 billion US dollars, at current exchange rates).

Prime Minister Carlos Agostinho do Rosario told the Assembly the extra money is needed for the response to the Covid-19 pandemic, for humanitarian assistance to the hundreds of thousands of people displaced from their homes by terrorism, mostly in the northern province of Cabo Delgado, and to “strengthen the operational capacity of the defence and security forces”, fighting against islamist terrorism in Cabo Delgado, and against the armed attacks by the self-styled “Renamo Military Junta” in the central provinces of Manica and Sofala.

The Assembly passed the original budget in April, four months after the start of the year. No Assembly sitting could be held in late 2019 because of the general elections of October that year.

The planned increase in expenditure is only possible because donors have pledged additional money for the response to Covid-19. The government had requested 700 million US dollars, said Rosario, “with the goal of mobilising resources to guarantee prevention and treatment of Covid-19, to ensure social protection, to compensate for the loss of state revenue, and to help the business sector recover from the effects of the pandemic”.

As of September, Mozambique’s partners had disbursed 452.4 million dollars, and that was enough for the government to draw up its amended budget.

It was only possible to do so, Rosario added, “when we had more consolidated information about the socio-economic situation of the country, and of the prospects for economic growth, as well as the disbursement of resources by our cooperation partners”.

Giving details on the amended budget, Economy and Finance Minister Adriano Maleiane said it increases the limit on public expenditure from 33.9 to 41.9 per cent of Gross Domestic Product (GDP).

The target for collecting state revenue rises from 23.1 to 24 per cent of GDP – but this is the result of the decline in Mozambican GDP.

The budget deficit, Maleiane said, rises from 10.8 to 17.9 per cent of GDP, and the limit on the government’s domestic borrowing rises sharply from 2.8 to 5.9 per cent of GDP.

Maleiane put the additional resources required to finance the amended budget at 28.7 billion meticais (about 393 million dollars), of which 5.4 billion would come from domestic resources, and 21.3 billion from foreign grants and loans.

The running costs financed by the budget rise from 228.3 to 231 billion meticais. That extra funding, Maleiane said, would pay for medicines, tests and reagents for the fight against Covid-19, and for personal protective equipment for health workers.

It would pay for hiring an additional 1,440 health professionals, and for a risk allowance paid to 42,170 health workers.

The extra funding, said the Ministry, will also improve the operational conditions of the defence and security forces facing the jihadists in Cabo Delgado and the Renamo Military Junta in Manica and Sofala, and pay for a supplement to the wages of the soldiers and police stationed in the two theatres of operations.

Maleiane said the number of beneficiaries from the government’s social protection programmes will rise from the 608,000 envisaged in the April budget to over a million. Additional allowances will be paid to key public companies, including Mozambique Airlines (LAM), Airports of Mozambique, and the municipal transport companies for the services they are providing during the pandemic.

Capital expenditure rises from the 70.9 billion meticais envisaged in April to 90.5 billion. Maleiane said this will pay for the construction and rehabilitation of 11 Covid-19 isolation wards (one for each province), and for 52 water supply systems.

Also covered are the construction and rehabilitation of 802 washroom and sanitation blocks in secondary schools, teacher training institutes and boarding homes, and the financing of agricultural marketing.

Maleiane assured the Assembly that the amended budget continues to prioritise Education, Health and Agriculture, which account for 52.9 per cent of public expenditure, excluding debt servicing and financial operations.

The total budget deficit rises from the 109.7 billion meticais envisaged in April to 159.9 billion now. Maleiane expected this to be financed by 39.2 billion meticais of foreign grants, 51 billion meticais of foreign loans, 53 billion meticais of domestic debt (through such mechanisms as treasury bonds and bills), and 16.6 billon meticais from capital gains tax.

The amended budget passed its first reading thanks to the majority enjoyed by the ruling Frelimo Party in the Assembly. The two opposition parties, Renamo and the Mozambique Democratic Movement (MDM), voted against.

Source: Agencia de Informacao de Mocambique