Mozambique expects foreign direct investment to climb 30 percent in the next four years as the economy expands, Finance Minister Manuel Chang said.
Investment will probably reach $450 million this year and $560 million by 2011, compared with $430 million in 2007, Chang said in an interview in Maputo, Mozambique today. Agriculture and tourism are likely to be the main beneficiaries.
Mozambique’s $6.6 billion economy has been one of the fastest growing on the continent, expanding more than 8 percent on average in the decade through 2006. The southern African nation neighboring Zimbabwe and South Africa has benefited from debt relief and investment in projects, such as the Mozal aluminum smelter, which is 47 percent owned by BHP Billiton, the world’s largest mining company.
“The economic outlook is good,” Chang said. “The potential for more foreign direct investment is still great. There is enormous potential that remains unexploited in tourism.”
Foreign direct investment averaged $97 million a year between 1990 and 2000, and reached $154 million in 2006, according to data from the United Nations Conference on Trade and Development.
Mozambique has stabilized its economy following a 17-year civil war that ended in 1992. The government is targeting economic growth of 7 percent a year for this year and 2009, Chang said, led mainly by construction, tourism and agriculture. The economy expanded 7.3 percent in 2007, compared with 8.5 percent the previous year.
While record oil and food prices have clouded the outlook for economic growth, the government is still expecting “robust” expansion in the economy, Chang said. Oil prices above $100 a barrel requires more foreign currency to pay for imports, putting strain on the country’s balance of payments account, he added.
Farming Subsidies
The government is aiming to subsidize farming, including fertilizers, to help boost food output and ease the impact of rising prices, Chang said. Rice, wheat and corn output is being targeted, with the aim of producing enough to cover the country’s consumption needs in the next three years, he added.
“The food crisis should be an incentive for farmers to produce more,” Chang said. “The Mozambican economy has proven to be resilient” to higher food and oil costs.
The cost of rice, a staple food for half the world’s population, has doubled in the past year, reaching a record $25.07 per 100 pounds on April 24. Prices of corn, wheat and soybean also reached records this year.
At the same time, agricultural input costs are rising. Nitrogen fertilizer increased 36 percent, and potash and phosphate fertilizers gained 96 percent in the past year, according to U.S. government data.
Donor Aid
The African Development Bank, which gives low-cost loans to poor countries on the continent, said yesterday it is aiming to raise $500 million for a fund that will help pay for fertilizers. The lender cited record food prices, which have led to riots in Senegal, Somalia and Egypt, as a “serious threat” to economic progress in Africa.
Mozambique is still one of the continent’s poorest countries and relies on international donor funds to finance almost half of its budget. Per-capita income was $310 in 2006, compared with $829 in Sub-Saharan Africa, according to World Bank data.
Donor aid accounts for about 5.9 percent of the country’s gross domestic product, according to data from the International Monetary Fund. That compares with about 2.7 percent of GDP for the rest of Sub-Saharan Africa, excluding South Africa and Nigeria.
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