Caught between Frelimo and the exasperation of international donors, the Finance Ministry is a confusing place to be.
New horror stories about public finances are continually emerging from the Finance Ministry as the confusion over who borrowed what and from whom beleaguers civil servants and political appointees. Some see the Ministry as massively incompetent while others say it is simply not in possession of the facts of which it is meant to be in charge. Either way, calls are growing for a set of fresh faces to repair broken relations with the International Monetary Fund (IMF), donors and the public.
Also ripe for replacement is the Governor of the central bank, the Banco de Moçambique, Ernesto Gove. Under his management, the bank excessively manipulated the exchange rate and built its extravagantly luxurious headquarters in Maputo. Gove was seen last week enjoying a lavish holiday on Miami (United States), in photographs published in social media by his children and then relayed to the public. The contrast between such luxury and the penury many suffer at home was stark enough.
Then outrage grew because such a holiday looks highly improbable on the official hard currency withdrawal limit of around US$1,000 a month. So severe is the US dollar shortage that some banks can’t even manage that. Gove’s days are numbered, we hear. President Filipe Nyusi already disliked him strongly, say sources in the governing Frelimo.
Finance Minister Adriano Maleiane is hardly in better odour, his fabled competence appearing less than advertised and his reputed integrity questioned by Mozambicans who accuse him of playing a key role in the continued concealment of the hidden loans. His conduct has damaged relations with the IMF and donors.
Last December, he grudgingly signed a letter to the Fund stating that government guarantees on the secret private loans totalled only US$897-million. However, we can now reveal that he had already met representatives of Russia’s VTB bank in Maputo to discuss the hidden loans and had seen the figures.
Africa Confidential has also learned that the state security-linked company, Mozambique Asset Management (MAM), was audited in November 2015. VTB provided clear data for the auditors, including the US$35-million loan arrangement fee which was added to the US$500-million loan. Given the State links and the government-guarantee, one would have expected the Finance Minister to have seen the documents.
Minister Maleiane’s deputy Minister, Maria Isaltina Lucas, seems to be regularly at odds with the Minister as she tries to prevent his toxic reputation rubbing off on her. She, however, was heavily involved in the hidden loans saga while Secretary to the Treasury under the then finance minister, Manuel Chang.
She owes her current position to being seen as one of the few relatively competent officials around. Some suggest she could replace Minister Maleiane. Yet many Frelimo and donor sources oppose the idea because they think she should be on the list of those to be held to account over the debt debacle.
The government is stuck when it comes to replacements. The hunt for a suitable finance minister has even extended to the diaspora but so far, to no avail. That hot seat – and that of central bank governor – is hardly likely to attract successful economists abroad, least of all while the country is heading towards bankruptcy. Conscious of this problem, according to diplomats in Maputo, Frelimo has been hoping that donors would finance a salary attractive enough to tempt the right calibre of new central bank governor – a bizarre aspiration at any time but especially now.
Budget secrets are expensive:
Mozambique’s belated monetary policy adjustments cannot keep up with the metical, which continues to negate much of the benefit of new austerity measures. July’s revised budget assumes an exchange rate of MT52 to the US dollar, which immediately cast doubt over the Finance Ministry’s calculations, which already forecast foreign reserve levels to fall to a dismal US$1.2-billion instead of the US$2.3-billion originally predicted for 2016.
While the budget goes some way to addressing macro-economic imbalances, it made cuts of only 1.1% and even increased spending on the Presidential Guard. Overall, those at the top of the pyramid come out better than those at the bottom. Leading local economists predict negative growth this year.
Another confidence-draining factor is the lack of transparency at a time when restoring confidence is so important. There is an unusually large provision in the budget for unspecified ‘contingency’
spending. Mozambican economists João Mosca and António Francisco have told the local media that their own Ministry sources say that up to 20% of the budget may be allocated to ‘unspecified’ spending.
Calculations based on the government’s fiscal tables indicate that at least 10% of current central government spending is unallocated, a far higher level than the generally accepted 5% ceiling. It has multiplied by around 10, from M1.2-billion to M10.3-billion. The most logical conclusion is that some of this is to cover repayment of the hidden debt.
Donor sources confirm this is the case, as to leave this out of the budget could be interpreted by creditors as a sign of a decision to default. Rather than try to explain this to parliament and win its approval, the government instead opted for its classic position of obfuscation. This tendency to secrecy is precisely, critics say, part of why Mozambique is in its current mess.
Source: Africa Confidential
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