Breaking News: Budget support donors suspend aid to Mozambique

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Breaking News: Budget support donors suspend aid to Mozambique

9:05 CAT | 03 May 2016

The group of donors to the State of Mozambique Budget has decided to suspend international aid to the country, following the revelation of hidden debt in the public accounts, two international partners told Lusa.

One partner told Lusa that the Mozambican government is aware of the decision, although it has not been formally notified. The decision only gains official status when notified to the executive by the so-called G14, currently chaired by Portugal.

The Mozambican government confirmed on Thursday (April 28) loans guaranteed by the state between 2013 and 2014. A US$622 million (EUR 543 million) loan is in favour of Proindicus and another loan, worth US$535 million (EUR 467 million), was contracted in favour of Mozambique Asset Management (MAM) for coastal protection and of gas reserves in northern Mozambique

In addition to these debts, the Government has recognized the existence of a bilateral loan contracted between 2009 and 2014 of US$221.1 million dollars (EUR 193 million), “in the context of strengthening the capacity to ensure public order and security “.

In total, about US$1.4 billion dollars were not included in the public accounts, leading the International Monetary Fund (IMF) to suspend a mission that it had planned to Maputo and also the release of the second ‘tranche’ of a loan to Mozambique.

Also the World Bank and the United Kingdom have announced the suspension of their funding.

The Mozambican Company Tuna (Ematum) was the first known case of a loan (US$850 million) guaranteed by the State in 2013, without registration in the public accounts.

The amount has since entered the public debt of Mozambique and Ematum titles changed, in March, into sovereign debt. With the revelation of new loans, the public debt of Mozambique is now US$11.66 billion (EUR 10.1 billion euros), of which US$9.890 million (EUR 8,6 billion) are external debt.

This represents over 70 percent of the country’s Gross Domestic Product (GDP) and reflects a debt climbing since 2012, when it was fixed at 42 percent.

The Mozambican prime minister said on Thursday that the government expects the companies that received loans to pay part of the debts and that the state will only take what is in the public interest.

“We want to make it clear that, under these debts, the state will take over which is in the public interest and the part relating to the commercial component must be paid by the respective companies,” said Carlos Agostinho do Rosario, at a press conference in Maputo, after returning from Washington, where he had gone to provide clarification to the IMF and the World Bank on the so-called hidden debts.

The IMF has stated that the meetings with the Prime Minister were “an important first step towards the full restoration of trust”, but warned that the revelation of new debt “significantly changes” the assessment of the macroeconomic perspective of Mozambique.

Source: Lusa