Won’t default, but won’t pay – Hanlon

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Won’t default, but won’t pay – Hanlon

6:45 CAT | 10 Jun 2016

Notícias

Mozambique will not default on its debt, but it is not a “priority” to pay the loans of Proindicus and MAM, Prime Minister Carlos Agostinho do Rosario told parliament Wednesday (8 June). do Rosario also confirmed that many members of the incoming government which took office in January 2015 were unaware of the Proindicus and MAM loans. The special session of parliament Thursday agreed unanimously to create a parliamentary commission of inquiry into the country’s public debt. Finance Minister Adriano Maleiane told Parliament that he would soon present an austerity programme to cut total expenditure planned for this year by 10%.

The Prime Minister said that it was tempting to default on the debt but that would do damage to the good image of Mozambique. However, he continued, “to prioritize the payment of debts, particularly of Proindicus and MAM, to the detriment of the financing high-priority projects set out in the five-year the government program, such as agriculture, education, health, and water, would not meet its commitments to the Mozambican people.”

He went on to say: “We would like to reaffirm, here and now, that the guarantees given by the government for the contracting of the debt of Proindicus and MAM, that the government only assumes that part of the debt that is proven to be applied to things in the public interest. It is for the justice system to decide what part is in the public interest and what part is commercial interest. We underline that these debts were taken by companies … and they have the responsibility to repay.” He added: “They have the responsibility to accept the debts and pay them, without burdening the state budget. The government restates its commitment to make the companies take their responsibilities”.

do Rosario argued that it is for the Attorney General and courts, not parliament, to clarify the doubts about the legality of the state guarantees made on this loans.

do Rosario and Finance Minister Adriano Maleiane only went a small way toward accepting the demands of the donors and lenders. The Prime Minister said simply that the government will “continue to work with the IMF to evaluate the macroeconomic impact of the recent information supplied by the government on public debt [and] agree mechanisms with the cooperation partners, including the IMF, to achieve a Medium Term Fiscal Plan that does not lead to reduction of social indicators.” Clearly the hope is that donors will return rather than allow the poor to suffer.

Maleiane went a bit further. He said they would increase the capacity of the Risk Management Office, which, he said, “is responsible for auditing, monitoring and management of fiscal risks, particularly with regard to internal and external loans, issuance of sovereign guarantees and reporting investors and rating agencies. ” He also wants transparency with respect to state guaranteed debt. And he pledged to parliament that he would “promote an independent assessment of the public debt database, in particular its system of recording, monitoring, reconciliation, sustainability analysis, and reporting, in order to prevent errors in the future.” But that falls far short of the forensic audit and restructuring demanded by donors.

The three secret government guaranteed loans are to EMATUM (Mozambique Tuna Company), $850 mn, already renegotiated; Proindicus, $622 mn for a new company to provide maritime security services, and MAM (Mozambique Assets Management), US$535 mn for maritime repairs and maintenance, particularly of the EMATUM fishing boats.

By: Joseph Hanlon

Source: News reports & clippings