Mozambique: Budget review may be necessary ‘in most extreme scenario’ if Gulf war escalates – minister

Mozambique is open to a budget review in an extreme scenario, if the Gulf War escalates and triggers a widespread rise in oil prices, Mozambique’s Finance Minister Carla Loveira told Lusa. Minister Loveira said on Thursday during an interview at the Mozambican Embassy in Brasília, amid a five-day official visit to Brazil, that “In a most extreme, adverse scenario, a budget review may indeed be necessary”. “The full impact [of the war], and these effects on the economy, through imported inflation, the rise in fuel prices and their impact on cost increases, particularly for the basic food basket, could lead to a rise in public expenditure.” Approximately 80% of Mozambique’s fuel imports pass through the Strait of Hormuz from the Middle East, but according to the finance minister, the country currently holds sufficient fuel reserves to last until May.

Nevertheless, the government has conducted a multi-scenario analysis of fuel supply and pricing: a baseline, a current and favourable scenario, and an adverse scenario that assumes further deterioration in the geopolitical situation. The minister said that Mozambique has fuel procurement agreements in place with “contracts signed until the end of the year,” and that the government is working to ensure these terms remain valid. “Our exercise is to try, as far as possible, to maintain agreed prices.

But we are facing an uncertain outlook, which is why we have alternative scenarios”. The government had projected Gross Domestic Product (GDP) growth of 2.8% and inflation of 4.8% in the 2026 Social and Economic Plan and State Budget, but these figures are now contingent on developments in the Middle East. The government warned that if the conflict persists, the pace of economic recovery could slow significantly, predicting that, in an extreme scenario where the price of a barrel of oil exceeds $140, the country’s economy could record negative growth.

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The government is considering activating the stabilisation fund to address social and corporate impacts of the war, promising to monitor the situation closely to mitigate the shock to the national economy. Israel and the United States launched a large-scale military offensive against Iran on 28 February, which responded by closing the Strait of Hormuz, launching strikes against targets in Israel, US bases, infrastructure in neighbouring countries, including Saudi Arabia, Bahrain, the UAE (United Arab Emirates), Qatar, Kuwait, Lebanon, Jordan, Oman and Iraq. Incidents involving Iranian projectiles have also been recorded in Cyprus, Turkey and Azerbaijan.

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