CMX Quarterly Bulletin

Why Mozambique? Why Canada

The government’s overarching economic policy goal remains to promote inclusive growth and poverty reduction as the economy moves away from its dependence on aid towards the exploitation of natural resources. Challenges include bridging infrastructure gaps, fostering linkages between the resources sector and the remainder of the economy and enhancing the quality of education, all of which are necessary to ensure that the benefits of natural resources are widely spread. The government will also strive to boost productivity in agriculture, although progress will be stymied by farmers’ limited access to funding, technology and markets. Despite resistance from vested interests, the government will continue to make efforts to improve the country’s framework for private-sector participation.

The management of natural resources will create specific policy challenges. The authorities successfully front-loaded the benefits from large offshore discoveries of natural gas in 2011‑13, earning around US$1.3bn in capital gains tax on gas-asset transactions without alienating investors. However, while awaiting royalties from gas extraction—which are not expected until 2020 at the earliest—the government will need to strike a balance between much-needed public investment and fiscal sustainability. Domestic expectations of higher spending will also have to be set against investor pressure for favorable treatment, not least given that the recent slump in international commodity prices has weakened the commercial appeal of Mozambique’s gas reserves. Overall, progress on resources management will be patchy.
Source: The Economist Intelligence Unit


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