The DSA presented in this document is based on the standard low-income countries (LIC) DSA framework. See “Staff Guidance Note on the Application of the Joint Bank-Fund Debt Sustainability Framework for Low-Income Countries” (http://www.imf.org/external/pp/longres.aspx?id=4827) and World Bank Report No. ACS6956, 10/23/13). Under the World Bank Country Policy and Institutional Assessment (CPIA); updated on July 25, 2014 with the 2013 CPIA rating, Mozambique maintains the medium policy performer rating, albeit close to the threshold of 3.75 for strong performers, with an average rating of 3.64 during 2012–14; the DSA uses the indicative thresholds for medium performers.
Computed based on US dollars per metical exchange rates; computation based on meticais per US dollar would return a 33 percent depreciation instead.
See IMF Country Report No. 15/223.
Gas and coal prices, which are important determinants of export receipts, are throughout the projection period expected to remain relatively subdued relative to recent peaks in line with Fall 2015 WEO assumptions.
Meanwhile, the non-megaproject current account is expected to remain on the order of 11-12 percent during the next years.
Main sources of the fiscal revenues are (i) the government’s share of gas profits, (ii) the corporate income tax on the concessionaires, and (iii) the dividends paid by the state-owned hydrocarbon company (ENH), which owns 10 and 15 percent stakes in the two exploration areas where gas has been found.
Total donor disbursements have fallen from 12 percent of GDP in 2010-11 to a projected 9½ percent in 2015, mainly on account of lower program aid. This declining trend is projected to continue throughout the projection period.
Thereby, total non-concessional borrowing under the PSI program has reached US$ 1,498 million.
As in the previous DSAs, the historical scenario has been excluded from Figures 1 and 3. The reason for the exclusion is that such a scenario shows unrealistically fast declines of public debt ratios over the medium term, because it fixes the non-interest current account deficit at a historical average of 19.3 percent of GDP. This is much lower than the average projected deficit of 67 percent of GDP during 2017-22. With private debt accumulation assumed to remain unchanged compared to the baseline, this assumption then results in unrealistically fast declines of public debt ratios.
The government is currently exploring options for refinancing this debt with an aim to inter alia lengthen its maturity, which could reduce near term debt service requirements.
Large residuals in Table 1 after 2020 result from large debt service and dividend payments on LNG investment, which are not included in the identified net debt-creating flows. They ramp up in line with LNG production and increasing from about 20 percent of GDP per year in the mid-2020s to over 25 percent of GDP in the early 2030s.
For more information see IMF (2013), “Staff Guidance Note on the Application of the Joint Bank-Fund Debt Sustainability Framework for Low-Income Countries”.
The impact the of the standard shocks in the DSA template is heightened by the fact that the standard stress tests revert to historical values, which are significantly different from current and expected values because of the structural change in the Mozambican economy resulting from the large-scale exploitation of coal and natural gas since 2011.
The scenario in which variables are at their historical levels has been omitted given that it generates negative debt as a result of the large changes in variables in the baseline arising from LNG activities.