Good afternoon. A bucket of cold water was emptied over thousands of people yesterday, when the Mozambican government announced that it did not have any money to support their business startup projects. A huge wave of applications has been received by the Local Development Fund, which was set up by President Daniel Chapo and which aims to support the development of small businesses, for example in farming or carpentry. But there is little or no money available at the moment to fund them, ministers say (see below). Raising people’s expectations and then disappointing them in this way is bound to cause them political damage.
Why the disappointment? Government spokesman Inocêncio Impissa did not go into details beyond saying it was caused by the budget deficit. But there has been a budget deficit for a long time. The fact is that the public finances are worse than the government expected when Chapo became president. Tax collection last year was much lower than forecast, as finance minister Carla Loveira has confirmed. A lot of business activity was paralysed for much of last year due to protests, and in addition, businesses have been reluctant to spend money due to pessimism about where the economy is going.
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The government continues to run public finances on a hand-to-mouth basis. It struggles to pay wages and bills to suppliers on time, although it is trying. The arrears are going down, but they have not been cleared yet. In the meantime, some things go unfunded. During the recent floods in southern Mozambique, the state-controlled company Cahora Bassa Hydroelectric paid the cost of hiring helicopters to rescue flood victims, at the request of the government.
