If Mozambique is going to renounce the government-guarantee on most of the US$2-billion in secret debt, it will need to argue that the then finance minister Manuel Chang acted unconstitutionally and illegally in signing the guarantee. And it would help Mozambique’s case if Chang were to be charged and eventually convicted for his action.
Two recent international cases show that senior figures can be convicted of serious crimes and not be punished, and that this is acceptable to the international community. The simplest way forward would be for Chang to plead guilty, avoiding a long trial, and a plea bargain could be agreed (technically not allowed in Mozambique); or President Filipe Nyusi could agree in advance to pardon Chang under Article 159 of the Constitution.
Christine Lagarde, managing director of the IMF, was found guilty on 19 December of “negligence with public money” in approving a €400-million payout of taxpayers’ money to controversial French businessman Bernard Tapie; she was the French finance minister at the time and acted against the advice of experts. Tapie has since been ordered to repay the money.
Although clearly a serious crime relating to a very large amount of money, the special court decided that Lagarde should not be punished and that the conviction would not constitute a criminal record. Within hours of the court’s decision, the IMF executive board convened a special meeting which gave Lagarde its full support.
The other case is less well known. On 18 November, the former director-general of the Portuguese spy agency (Servico de Informacoes Estrategicas de Defesa, SIED), Jorge Silva Carvalho, was convicted in a secret trial of violation of state secrecy, aggravated invasion of privacy and abuse of power. He was given a suspended sentence of four and a half years in prison, and thus walked free. After leaving SIED he was hired by Ongoing, one of the largest private companies in Portugal, and was convicted of giving Ongoing secret SIED documents. He was also convicted of invasion of privacy for commissioning secret investigations on the head of the company that owns the newspaper Expresso after it published details of the provision of secret documents.
In both cases, very senior officials committed serious crimes, but went free. Clearly neither the IMF nor Portugal (and thus the donor community) could object to Chang pleading guilty and then going free. But a guilty plea by Chang would add considerable weight to Mozambique refusing to recognize the government guarantee of the secret loans.
Source: Mozambique News Reports and Clippings
CIP points to unknown US$1.1-billion debt payment, plus printing money
In December 2016, the government’s own accounts led the CIP to point to two actions which seem unclear and questionable. One is US$1.1-billion external payment in 2015, which is unexplained but must be either a foreign loan repayment or an external loan made by the government – perhaps the on lending of some of the secret borrowing. The other is an increase in credit to the government in 2016 of US$950-million, which CIP says was effectively printing money.
The government accounts for 2015 (Conta Geral do Estado, CGE), recently submitted to parliament, have an entry for Foreign Borrowing – Other Operations of MT42.1-billion, equivalent to 7.2% of gross domestic product (GDP) and US$1.1-billion at the average 2015 exchange rate – an amount higher than the entire Ematum debt. This implies a foreign payment of US$1.1-billion relating to a loan, but there is no explanation in the accounts of this huge amount, and it is not included in the foreign debt tables.
CIP (Centro de Integridade Publica) says the National Accounts Office (Direccao Nacional de Contabilidade Publica, DNCP) would not provide further information on the matter. CIP conducted an additional calculations comparing various annual State accounts and noted that the money held by the government jumped dramatically from MT21.7-billion in 2012 to MT70-billion in 2013, a massive increase of US$1.6-billion (at 2013 exchange rates).
The money held by government remained the same in 2014, but then dropped equally dramatically to MT46.4-billion in 2015, a fall of US$650-million (at 2015 exchange rates). Does this reflect the secret borrowing in 2013, and then onlending of that money (for purchases including weapons) in 2015?
Another CIP report released in 2016 accused the government of “a structural problem in managing Mozambican public accounts [and] incessant interference by political elites in the conduct of the economy”. The actions of elites to protect themselves is delaying corrective
measures and damaging the economy. It said the government should stop blaming the war, the international economic crisis, and low agricultural productivity for the crisis, and look at the real causes, which are political. In 2014 imports were 38% of GDP (excluding mega-projects) and exports were only 23% – the difference was made up by aid, loans and foreign investment, all of which have collapsed.
It responded by borrowing US$950-million internally, which the CIP argued was effectively printing money, which in turn caused the inflation and devaluation. The response was a huge rise in interest rates and a sharp increase in import costs, which hit local business very hard. This is because the Mozambican economy “is mainly one of intermediation and services” with a high import content, and the crisis “reduces the capacity of business people to buy goods to re-sell”.
CIP concluded that there is “a permanent lack of transparency in the management of public goods” and that the political elites have no interest in making the changes that are necessary to stabilise prices and increase production and employment.
When President Filipe Nyusi was inaugurated on 15 January 2015 he promised zero tolerance for corruption in government and he has been repeating the message more recently. But in a third report, CIP said that this sentiment remains all words and no actions. “Corruption continues to cause major damage to the State [and] we can see no strategic and effective actions by the government to combat the lack of transparency and corruption in public bodies and institutions. The impunity of public officials involved in acts of corruption remains the rule, underpinned by the weak ability to recover funds illegally stolen from the state coffers”.
But three days after the report was issued, Prime Minister Carlos Agostinho do Rosário told parliament that preventing and fighting against corruption “are priorities in the action of our government, because corruption compromises the government’s efforts to improve living standards”. However, on 9 December President Filipe Nyusi admitted that corruption “persists in our country across practically all sectors of government, in both the public and private sectors, compromising social and human relations”.
Source: Mozambique News Reports & Clippings
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