MEFMI Facilitates at Bank of Moçambique Workshop on Balance of Payments

The Macroeconomic Management Programme conducted a one week In-country training workshop on the Balance of Payments (BOP) and International Investment (IIP) Position for Mozambique. This is in line with MEFMI Phase V (2017-2021) focus of strengthening country specific capacity building; drawing on the benefits of customised interventions witnessed from the previous Phase. The activity was funded by the African Capacity Building Foundation (ACBF).

The objective of the workshop was to enhance knowledge on the conceptual underpinnings and compilation methodology outlined in the 6th edition of the Balance of Payments and International Investment Position Manual (BPM6) and its Compilation Guide. The training was tailor made in line with the country’s request, to put special focus on the compilation of the financial account, consistency checks between the different accounts, compilation and analysis of the IIP for assessing external vulnerabilities.

The training was attended by nine (9) officials from the Bank of Moçambique, seven (7) officials from Moçambique Revenue Authority, three (3) officials from the National Statistics Office, and two (2) officials from the Ministry of Economy and Finance. In terms of gender participation, there were fifteen males and six (6) females, translating into 71% and 29% male and female representation, respectively.

The Workshop was facilitated by Dr. Kenneth Egesa, BOP Regional Expert; Dr. Wilson Phiri, MEFMI Accredited Fellow; and Ms. Vivian Namugambe, MEFMI Programme Manager.

The course consisted of a series of lectures and discussions on the conceptual and methodological framework underpinning the compilation of external sector statistics in accordance with the BPM6.  The following topics were covered in the lectures:-

• BPM6 Conceptual Framework and Core Accounting Principles
This session introduced participants to the definition and scope of the International Accounts i.e. the Balance of Payments, the International Investment Position, and the Other Changes Account. It also covered the core accounting principles governing the compilation of the international accounts that include; valuation principles, time of recording, unit of account, and residency principles.

• Goods and Services Account
These sessions highlighted the theoretical concepts and methodology governing the compilation of trade statistics; and their data sources. Particular emphasis was placed on trade in services, which has become an urgent area for capacity intervention owing to the data gaps that exist amidst its growing importance as an avenue for diversification and economic transformation.  Discussions were based on compilation with regard to the four modes of supply prescribed by the General Agreement on Trade in Services (GATS), the Extended Balance of Payments Services (EBOPS) classification, and the Foreign Affiliate Trade in Services (FATS) statistics.

• Primary and Secondary Income Accounts
The primary income account comprises earnings arising from the provision of a factor of production: labour, capital, land, entrepreneurship; while the secondary income account comprises further redistribution of income through current transfers. As such the sessions revolved around the concepts, coverage, classification, accrual recording and data sources for the income accounts.

• Capital Account
This session focused on the components of the capital account that include debt forgiveness, non-life insurance claims, investment grants, one-off guarantees and other debt assumption, taxes and other capital transfers.

• Financial Account
This was delivered through many sessions and it included lectures on the five functional categories of the financial account namely Direct Investment, Portfolio Investment, Financial Derivatives, Other Investment and Reserve Assets. The financial account is the most complicated account to compile in the BOP, and usually the main source of errors and omissions. As such, a lot of time was dedicated to make the participants understand the concepts and data sources underlying the compilation of the account.

• International Investment Position (IIP) and External Debt
This session focused on the compilation of the IIIP, and how to use it to generate external debt statistics. It should be noted that the IIP is one of the major focus under the BPM6, as previously stocks were not given much importance until after the global financial crisis, which revealed the need to monitor stocks of financial assets and liabilities. Participants were also shown how to compile the integrated IIP. The integrated IIP focuses on classification of valuation changes according to their drivers-exchange rate movements, or market price changes, or other changes in volume; that explain movements in stocks other than just movements arising from transactions. Although Bank of Mozambique compiles an IIP, it is not compiling an integrated IIP yet. No country in the MEFMI region is compiling an Integrated IIP yet, and this area needs more hands-on capacity building in this regard.

• Balance Sheet Analysis using the IIP
This session focused on the importance of the IIP in balance sheet analysis to assess external vulnerabilities. Balance sheet mismatches that were discussed included; maturity mismatches, currency mismatches, financial structure problems (debt vs equity financing), solvency problems, and dependency problems that could lead to contagion effects.

• Consistency and linkages of the BOP/IIP with other macroeconomic accounts
This was a very important session as it covered the linkages between the BOP and IIP with other macroeconomic accounts. This helps compilers to identify any inconsistencies that might be in the accounts. In addition, participants were taught how to identify possible causes of errors and omissions in the BOP and how to interpret their signs.

As part of efforts to strengthen institutional collaboration in the production of statistics, the Bank of Mocambique invited participants from other relevant institutions that included the Ministry of Finance, the National Statistics Office and the Revenue Authority.

The main learning outcome from this workshop was the development of proficiency amongst officials from key institutions in Mozambique on the compilation and analysis of the BOP and IIP in line with BPM6 methodology.

The workshop provided an opportunity to look at the progress that the Bank of Mozambique had made in closing data gaps in their BOP and IIP.  It should be noted that Mozambique was one of the first countries in the region to migrate to BPM6.