Mozambican government has not realized the urgency and seriousness of hidden debt, warns European diplomat

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Mozambican government has not realized the urgency and seriousness of hidden debt, warns European diplomat

3:49 CAT | 06 May 2016

The Mozambican government ” has not realized the urgency and seriousness” of the debts it failed to disclose in pubic accounts, a European diplomatic source has told Lusa, lamenting the loss of trust by international donors triggered by the hidden borrowings situation.

“It gives the impression that the government believes that it can just say a ‘mea culpa’ and ‘reset’,” said the diplomatic source, who justified the European donors’ suspension of funding to the Mozambican state budget with the understanding that “total trust can not exist alongside hidden debts”.

Noting that the G14 acts “with one voice”, the same source said that both the Mozambican Prime Minister Carlos Agostinho do Rosario, and Minister of Economy and Finance, Adriano Maleiane, have been told that donors were not going to meet the disbursement.

The basis of the decision is “a breach of the fundamental principles” in the Memorandum of Understanding signed with the government and “lack of transparency, in violation of agreements with the IMF and the World Bank”.

Between 2013 and 2014, the diplomatic source said, the Mozambican government kept US$2.2 billion off its state accounts, which includes state-guaranteed loans for the purchase of military equipment revealed in April, and the Mozambican Tuna Company (Ematum) loan to purchase a fishing fleet and patrol vessels discovered earlier.

“Suddenly, donors find that 15 percent of GDP [Gross Domestic Product GDP] was spent on defence and security in one year,” said the source, noting that the figures were hidden “because they could not have the support” of international partners interested chiefly in inclusive development and poverty alleviation.

In addition to hidden loans escalating public debt, Mozambique is simultaneously facing an economic crisis, a sharp devaluation of the metical, rising inflation and political and military instability in the centre of the country.

“There is an undeclared war between the government and Renamo [Mozambique National Resistance], murders that are not investigated, Renamo attacks on civilian cars on the country’s main road and now this case of people found killed by unnamed forces,” said the source, adding that this cycle of violence is also influencing donors “and must stop”.

The several crises, economic, debt, political and military, “are affecting the country’s internal stability and international reputation”, says the source, and among all of them, “one no longer knows which is worst”.

Following the disclosure of the hidden debts, the IMF suspended a planned mission to Maputo and the disbursement of the second tranche of a pre-agreed loan.

In Maputo on an official visit, Portugal’s President de Sousa said on Wednesday that the G14 group of international donors, which is currently chaired by Portugal, suspended aid to Mozambique “for clarification purposes”, and not definitively, adding that talks have been initiated.

The World Bank and the United Kingdom have also announced the suspension of funding.

Mozambican president Filipe Nyusi has pointed out that the government acknowledged the existence of the debts assumed by the previous executive as soon as it knew about them, and proposed an analogy between Mozambique’s situation and malaria, saying it was now necessary “to disinfect the house” and regain donor confidence.

“If we disinfect the house, banish the mosquitoes and live a normal life, I believe that no donor country, no friend, will wish to incriminate Mozambique and sacrifice Mozambicans,” he said.

Source: Lusa