Mozambique Public Expenditure Review : Addressing the Challenges of Today, Seizing the Opportunities of Tomorrow

Abstract

Mozambique's economy has
 experienced strong and sustained growth since the end of the
 country s civil war in 1992. Over time, the sources of
 revenues are changing, bringing both opportunities and
 challenges for fiscal management. The government has
 loosened fiscal policy in the past few years, and the
 current fiscal stance does not appear sustainable. Public
 spending is projected at almost 42 percent of gross domestic
 product (GDP) in 2014, and the deficit after grants is
 expected to widen to over 9 percent of GDP. These fiscal
 consolidation efforts will require reprioritizing
 expenditures and increasing the efficiency of spending, to
 ensure sufficient resources are allocated to priority
 sectors. Looking ahead, substantial resource revenues
 expected toward the end of the decade present an
 unprecedented opportunity but this will need to be well
 managed. The 2001 and 2003 public expenditure reviews
 indicated that a number of financial management reforms are
 required, which the government successfully implemented.
 However, it is important to build on this progress to ensure
 that the government is sufficiently prepared to address the
 challenges ahead. Given external economic shocks and the
 possibility of weaker commodity prices, resource revenues
 can be delayed or reduced. Therefore, it will be important
 to adopt a prudent fiscal stance in the medium term to
 adequately prepare for the changes ahead.