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5.4 Macroeconomic Convergence Problem Areas
From the Table 11 below, it is clear that most of the problems for
Mozambique regarding the matrix of convergence indicators, the
budget deficit as % of GDP, and domestic savings rates (%), are areas
where the potential of achieving the compromises are very low. On
the other hand, the target indicators for inflation, debt, external
reserves, and central bank credit to Government are likely to be
achieved.
Table able 11: 11: Macr Macr Macroeconomic Macr Macr oeconomic Conver Convergence Conver gence Assessement Assessement - - "On-T "On-Track"
"On-T rack"
Numeric Numeric VV
Values V alues of of of
Tar ar arget ar get Indicators Indicators
Indicators
2008 2008 2012 2012 2018 2018 Mozambique Mozambique performance performance assessment
assessment
assessment
Core inflation 9% 5% 3% Inflation in 2004 was 9%. The
Government committed to keep the
indicator at one digit level (Government
Plan 2005-2009)
External debt-% GDP Within target stability. Post HIPIC debt
ratios at sustainable levels
External reserves
(months of imports) 3 6 6 In 2004 the external reserves covered 5
months of imports in average
Central bank credit to
Government 10% 5% 5% The Government is limited to borrow
from the Central Bank, under the IMF
agreements
Source: Country Study, 2005
World Bank data state that Mozambique is one of the countries most
dependent on external aid worldwide - around 50% of the budget is
foreign financed. Some of the factors accruing to the persistence of
the high level of the government budget are structural. From the
revenue side, it is evident that the capacity of mobilisation of domestic
revenues is very low.
The level of revenues as % of the GDP has been barely unchanged
at the 12%, which is still very low even comparing at optimum levels
for this figure in developed countries. The expenditure side has been
showing an erratic behaviour. For instance, the current expenditures
have been unchanged at about 13% of GDP, while the investment
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