Mozambique: Monitoring Forum urges "deep reforms" in 2018 Draft State Budget
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In an interview with DW, a Mozambican researcher says that while the Kroll report summary clarifies important issues, the “essence of the problem continues”, potentially hindering the resumption of international financial aid.
Auditing the entire hidden debts process in Mozambique was the main demand of the International Monetary Fund (IMF) after it cut aid to the country after the discovery of the so-called hidden debts. Other international aid partners also suspended direct budget support.
Over the weekend the Mozambican attorney general released the summary of US consultancy report. But is the carrying out and disclosure of the audit sufficient for aid partners to resume the much-needed financial support?
In the opinion of Institute of Social and Economic Studies of Mozambique (IESE) researcher Fernanda Massarongo it will not be as simple. “There are several aspects that Mozambique has to solve to regain investor confidence,” said the expert.
For Massarongo, Kroll’s audit summary clarified some important questions, “but the essence of the problem is still there”.
DW Africa: Is disclosure of Kroll’s report enough for countries to resume [direct budget] support?
Fernanda Massarongo (FM): I think it’s necessary first to look at the main issues raised by donors and partners when discontinuing aid and direct support to Mozambique. One of the fundamental questions is the breaking of the law, therefore, violation of the Constitution and of the Budget Law, which are the fundamental laws for the functioning of any democracy.
The fact that the debts were taken on without the knowledge of parliament or donors obviously influenced the [interruption of] aid. And in the case of the IMF, it was also pointed out that Mozambique is in a state of instability, and that the relationship with the country would only be resumed once debt moved to a level of sustainability, which would depend on negotiation with the main holders of international debt securities of Mozambique.
Now, the question is, does the report answer these questions? Does the report solve these issues? I do not think so yet. There are clarifications that have been made, but the essence of the problem is still there. There is a lot of work yet to be done.
DW Africa: So you mean that the accountability of the authors of this debt is fundamental to the restoration of this financial aid to Mozambique?
FM: Partly. Obviously there are institutions, such as the IMF, that have already made it clear that accountability is not a fundamental problem for them. The most important thing is to know where the funds went to. But even in terms of this question of the use of funds, of the application of the funds themselves, it is still not clear from either side, nor in the report. The report itself says there are US$500 million unaccounted for. No information yet. There is a supplier of the military equipment who denies having supplied the material to the government, while at the same time EMATUM says it bought military equipment with part of the money. So there is no enlightenment yet.
DW Africa: The IMF expressed satisfaction with the release of the Kroll report. Could this be understood as the beginning of the end of the tension between this institution and Mozambique?
FM: I think at the moment it easy to express satisfaction with the fact that the audit was carried out and [its summary] presented by the auditing body [the Attorney General’s Office]. There is still a discussion of the content of the report to be had with the mission that is to visit Mozambique in the coming days. I think it will be known then whether the IMF is really happy with the situation, because if you look at the essence of the [summary] report, there are several aspects that are not yet clear. There are aspects of business management and of the use of the funds, which, as I said before, are not yet clear. And in order to regain confidence, these aspects have to be clear.
DW Africa: Will this auditing and possible accountability of the authors help build trust among foreign investors?
FM: I think it’s a first step, above all else. But it is not definitive. There are several aspects that Mozambique has to solve to regain investor confidence. For example, one fundamental aspect is that Mozambique is not able to repay part of its debt. There is debt to Brazil which it was reported some days ago the country is not able to pay. All these questions put donors in some doubt as to whether it is still worth it to invest in the country.
Mozambique has to demonstrate that there is assiduity in the functioning of the institutions themselves, that there is a prudent use of the public purse and that it is a sustainable country. At this moment we are still not at the level of sustainability. It is said that the crisis is over, but this can only be said when the country itself is managing to meet its commitments and debts.Source: Deutsche Welle