Mozambique aims to reconcile with new-look IMF team – but key hurdle remains

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President Filipe Nyusi will visit Christine Lagarde in Washington, DC next month ahead of a new International Monetary Fund (IMF) mission that is expected to arrive in Maputo later in September. Together with personnel changes in key positions at the Fund, the stage could be set for a thaw in relations – should Mozambique’s government accede to the IMF’s key demand for an independent, international audit of US$2-billion in opaque state-backed borrowing.

Relations between Mozambique and the IMF were suspended following the April 2016 discovery of US$1.4-billion in hidden government-guaranteed borrowing, on top of the already controversial US$850million borrowed by state-guaranteed tuna fishing company Ematum.

The IMF froze disbursement of an emergency credit facility after the discovery of US$622-million borrowed by Proindicus, a maritime security company owned by Mozambique’s secret services, and US$535-million borrowed by Mozambique Asset Management (MAM), a ship-building firm established to support Ematum and Proindicus. All three companies are in dire financial straits and unable to repay their loans, while questions remain unanswered over where the US$2-billion ended up.

Western donors followed the IMF’s lead, freezing budget support and in some cases, all aid that went through government agencies. The IMF cancelled a trip to Mozambique in April, visiting in June instead and calling for an independent, international audit to be conducted into the three loans.

The government has so far stood firm against the demand – but nevertheless, another IMF mission will arrive in Maputo on 22 September “to review recent economic developments and continue to advise the authorities on macro-economic policies”, an IMF spokesperson told Zitamar News. The mission will focus on assessing “progress in implementing the 2016 revised budget and the monetary policy measures recently adopted by the Banco de Moçambique.

Changing of the guard at the IMF:

Two of the Fund’s harshest critics of Mozambique are leaving their posts at the end of August. The IMF resident representative in Mozambique, Alex Segura-Ubiergo, has come to the end of his three-year posting and will be replaced by Brazilian Ari Aisen. Aisen starts in Maputo on 9 September after three years in Washington, which came after a threeyear stint as the IMF’s representative to Tajikistan.

Segura-Ubiergo’s departure will be an important step in clearing the way for a reconciliation between the IMF and Mozambique. The hidden debts were taken out on Segura-Ubiergo’s watch and Zitamar understands he took the deception personally. He has also taken some criticism for allowing it to take place undetected. Relations between Segura-Ubiergo and senior government members, including Finance Minister Adriano Maleiane, were irreparable damaged in the weeks after the debts were discovered.

Also at the end of August, the head of the IMF’s Africa Department (AFR), Antoinette Sayeh, is retiring. She was the person who, at the Spring Meetings in Washington, announced that Mozambique had hidden debts of US$1.4-billion from the Fund – directly contradicting Minister Maleiane who that morning had publicly claimed the opposite.

Roberto Tibana, a Mozambican economist who has spent his career at international finance institutions and worked with Sayeh while she was Liberian finance minister, told Zitamar that Sayeh was probably a strong influence behind the Fund’s hard-line on Mozambique.

Tibana described her as an “integrity rock”, adding that she “hates corruption and takes every opportunity to fight it”.

Sayeh was probably a big influence on Lagarde’s decision to publicly say Mozambique had been “clearly concealing corruption” in May this year, Tibana told Zitamar.

Too soon to make up:

Despite the departure of Sayeh and Segura-Ubiergo, in the absence of an independent audit, President Nyusi is unlikely to be able to talk Mozambique back into the IMF’s good books when he meets Lagarde next month.

On 14 July, IMF spokesperson Gerry Rice told a press conference that the international and independent audit demanded by the IMF in late June is a necessary condition for a Fund review to be completed – which is in turn a precondition of funding support to be resorted. “Our understanding is at this stage the government is not ready to move forward with the audit”, he said. “That’s kind of where we stand”.

Tibana argues that the Africa Department may not even be the one making the decision. “It is my understanding that the Africa Department is under pressure from Strategy and Policy Review (SPR), a very powerful but publicly little-known department in the Fund, not to let go”, he said. “In fact it is my understanding that SPR played a key role in pushing the AFR towards suspending the programme. I guess staff would have wanted to fudge thing as they did when they first found out about Ematum”.

Joanna Kuenssberg, the United Kingdom’s High Commissioner to

Mozambique, confirmed for Zitamar on 18 August that the donor community remains firm on the question of an independent audit. “The UK shares the view of other donors that the government of Mozambique needs to commission an independent international audit of the debts contracted by the three state-owned companies in question”, she told Zitamar.

“It is a necessary step towards restoring the trust that was shattered by the concealment of these huge state-backed debts”, she added.

Tibana agrees that the IMF must stand firm, for the sake of its own credibility. “I cannot see how and why, having publicly staked its reputation by making a clear demand, the IMF can reset [relations] with the government having refused to move an inch towards meeting such a key demand. To me this would further put a dent on [the IMF’s] reputation”, he told Zitamar.

Some of the IMF’s shareholders might even think that the Fund has already been lenient with Mozambique, Tibana argued. “Under normal circumstances, the IMF should have requested Mozambique to return the monies received as a first tranche of the suspended programme. Not doing that was a concession that may have already irritated some shareholders”, he said.

The long road back:

For now, the government is commissioning internal investigation into the deals, including a parliamentary commission, the majority of whose members come from the ruling party, and which has been boycotted by main opposition party Renamo. The Prosecutor General’s office also announced a preliminary finding that the loans were probably illegal – although its next steps remain unclear.

According to Tibana, the Prosecutor General “made things worse by publicly acknowledging the existence of a serious criminal breach of national laws, yet not moving to the logical next step of … a trial. This plays as evidence that national institutions are not in a position to move with the matter to the final consequences”, he said.

For High Commissioner Kuenssberg, the findings of an independent audit “would be useful for the work of the AttorneyGeneral’s office, Parliament and other Mozambican institutions that might look into these matters. The Mozambican public also has many unanswered questions, which the audit could help address”.

The UK is also willing, she said, to consider funding such an exercise – but so far, the government is showing no signs of readiness to launch one.

“We welcome indications from the Mozambican side of greater openness to this requirement”, High Commissioner Kuenssberg said. “We would expect the government and any other relevant institution to co-operate openly with the conduct of such an audit”.

Whether the audit needs to be completed, or merely initiated, for IMF and donor funding to restart may be the focus of debate within the donor community going forward – but having staked their reputations on the key demand, neither party can turn back at this stage.

Source: Zitamar News

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