Public debt could bankrupt Mozambique, researchers say

sovereign debt default

Mozambican researchers warned this Wednesday, that the rampant increase in public debt may lead Mozambique to default on its debts, generating unemployment and social conflict driven by the apparent impotence of the judiciary to bring the authors of the hidden loans to account.

“With the current level of public debt, Mozambique has come nearly to a situation of bankruptcy. And this would be fraudulent bankruptcy, unlike the economic and financial crises of the past,” said the economist and researcher at the Institute of Social Studies and Economic (IESE) António Francisco during a roundtable on Mozambican debt.

Emphasizing that the increased volume of Mozambique’s debt resulted from “deceptions and lies”, António Francisco accused the International Monetary Fund (IMF) of complicity for having always maintained that the country had a robust economy.

“Economic growth based on foreign savings, expansion of debt and donations would, sooner or later, take us to this point,” said the academic, who is a professor at the Faculty of Economics in Eduardo Mondlane University and was speaking at the meeting promoted by the Centre of Public Integrity (CIP), IESE and the Rural Observatory (OMR).

In turn, João Mosca, economist and a researcher at the OMR, a rural economy research NGO, said that a period of austerity to rein in the public debt was inevitable, but warned of social and labour conflicts in consequence.

“It will require of economic restructuring measures, bigger and better regulation, more transparency in state finances, broadening of the tax base and an end to tax exemptions,” said Mosca.

Given the current situation, he continued, Mozambique will have to rely again on the IMF, which will impose conditions which will aggravate poverty and are unlikely to be accepted by the poor.

Baltazar Faela, jurist and researcher in CIP, accused the attorney general of dereliction of duty for failing to initiate criminal investigations into the undeclared debts.

“There is a presumption of innocence in Mozambique, but what we see in these debt cases is that the government has violated the laws and budgetary principles and the Constitution by failing to ask the National Assembly’s permission to contract large debts” Faela said.

Faela accused the attorney general of double standards, since his office had undertaken prosecutions in the past in the absence of any specific complaint, but had remained silent about debts secretly contracted by the Mozambican government.

Source: Jornal de Ngócios /Lusa

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