Could the International Monetary fund back off Mozambique?

Back-Off IMF

Satisfying the IMF remains key to resolving part of the secret debt crisis. When President Filipe Nyusi goes to the United States from 15 to 20 September and meets the gas companies, he hopes to ensure more than US$1-billion in capital gains to fill the budget hole.

He will also meet IMF head Christine Lagarde in Washington. The next IMF mission will arrive in Mozambique on 22 September. As mentioned in the previous article, “two of the Fund’s harshest critics of Mozambique are leaving their posts at the end of August”.

Resident representative Alex SeguraUbiergo has finished his three-year term and will be replaced by Brazilian Ari Aisen, while the head of the Africa Department, Antoinette Sayeh, is retiring. Both took the revelation of the secret debts as a personal affront.

President Nyusi will want two things from the IMF – that it does not require a forensic audit of how the money was used (thus protecting his predecessor Armando Guebuza and others in the Frelimo leadership who may have benefited), and that they accept that the capital gains tax can be used to plug the hole.

Loan pushing and other debt background:

The original Ematum bond was only US$$500-million, but so many investment funds wanted to lend Mozambique money in 2013 that the country was encouraged to borrow an extra US$350-million that it did not need. This is a classic example of what is known as “loan pushing”. The global economy is cyclic and there are periods, as now, when there is surplus capital and lenders take on increasingly risky lending to developing countries – often encouraging countries to borrow too much, as happened in the 1920s, 1970s and recently.

Is the investigation of hidden debts crucial for a Mozambique-IMF reconciliation?

Economists are divided on the issue of a reconciliation between the IMF and Mozambique. The fact that the country is a member of the IMF supports the optimism of some, while according to others the absence of a serious investigation could further distance the parties.

President Filipe Nyusi will visit the United States in mid-September, during which time an IMF mission is scheduled to visit Mozambique in the context of the clarification of hidden debts made by state-owned enterprises and backed by State guarantees. The visits are seen as a kind of rapprochement between Maputo and the Bretton Woods institution.

Mozambican economist José Chichava is one of the apologists of this vision. “We must assume that Mozambique is member of the IMF, and as such it would not be wise even for the Fund to not approach a member when it has problems and help solve the problem”.

Space for dialogue is also valued by another Mozambican economist. Orlando da Conceição welcomes the fact that all channels for clarifying and better managing the hidden debts are being explored.

Government must change attitude:

But Conceição is not so optimistic about the way the Mozambican government is handling the case. According to him, “While the country does not take this with due seriousness, accepting a forensic audit by international experts, and while not taking responsibility for what happened, I do not see great results”.

And Conceição expects more from the government. “It will be a visit, working on a technical level, but there has to be a commitment whereby Mozambican authorities recognise that there was illegal action and take measures”.

The IMF called for an international audit last June, but President Nyusi argued that an investigation must first be conducted internally by the Attorney-General’s Office and the National Assembly, which created a commission, though not an all-party one.

Will the IMF return to the country without the results of the investigation being made known? Conceição says that: “I do not believe the IMF’s attitude will progress beyond this. In order to make further commitments, continue to give their support, this [investigation] is a sine qua non condition.

I have many doubts that the work that the Attorney-General is conducting will have any effect. I will not even talk about parliament, because parliament is truly wasting time. There is minimal respect for the voters. People in parliament are not taking this matter with due seriousness, so I do not see any light at the end of the tunnel”.

Is there a light at the end of the tunnel?

Chichava holds a different view, and is more optimistic. “I think we will find a way. I think the country will get back on track and the International Monetary Fund will resume the relationship that it has always had with Mozambique”, he says.

Meanwhile, the international rating agencies have been lowering Mozambique’s ratings. The confidence of financial agencies is shaken, and they warn of a failure to satisfy creditors.

MAM, one of the companies that benefited from the hidden loans, has already failed to make its first repayment, and the State also had to intervene in the case of Ematum, another company involved in the financial scandal.

Source: Deutsche Welle

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