Mozambique: “Enormous task to restore credibility” says Zandamela

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Mozambique: “Enormous task to restore credibility” says Zandamela

8:30 CAT | 02 Sep 2016

TVM / Rogério lucas Zandamela, newly sworn in governor of Mozambique's Central Bank

The new governor of the Bank of Mozambique, Rogerio Zandamela, on Thursday warned that not only the central bank, but all of society, faces an enormous task, “to restore and recover our credibility, both internally and with the international community”.

Speaking to reporters immediately after President Filipe Nyusi had sworn him into office, Zandamela added “at the same time we must restore trust in the Mozambican economy, so that we can contribute to what we all desire, which is sustainable economic growth with greater social justice and well-being for all of Mozambican society”.

He warned that there are “enormous sacrifices” ahead and that the governor of the central bank has no “magic wand” to overcome the current economic crisis. Nonetheless, he believed there is no such thing as a problem that has no solution.

Thus the first words of the new governor were a frank admission that Mozambique’s international credibility has been seriously damaged. This is the result of the reckless government-guaranteed lending that occurred in 2013-14, when Nyusi’s predecessor, Armando Guebuza, was in office.

Eyebrows were first raised by the issuing of bonds to the value of 850 million US dollars by the Mozambique Tuna Company (EMATUM). The government guarantee for this sum was a blatant violation of the limit on such guarantees in the 2013 budget law.

But at least the EMATUM bonds, sold on the Euopean bond market, were in the public domain. The same could not be said for the loans to Proindicus, a company set up to guarantee security for companies exploring for hydrocarbons, and other shipping in the Mozambique Channel, and for Mozambique Asset Management (MAM), whose main aim is to maintain and repair shipping. Those two loans amounted to over 1.1 billion dollars, and they were not disclosed, either to the Mozambican public or to the country’s partners, including the International Monetary Fund.

Even the Bank of Mozambique was unaware of the scale of this lending. Zandamela’s predecessor, Ernesto Gove, declared publicly that he had never heard of Proindicus.

When the loans became public knowledge in April, the IMF suspended its programme with Mozambique, including disbursement of the second instalment of a 282 million dollar loan from its Standby Credit Facility (SCF). Other partners, including all 14 donors and financial agencies that provided direct support to the Mozambican budget, also suspended financial aid.

The IMF has made it clear that the main condition for restoring normal relations is an independent, international, forensic audit of the Ematum, Proindicus and MAM loans. The Mozambican Attorney-General’s Office (PGR) has launched an investigation into the loans, and has already admitted that there are signs of criminal behaviour.

For the IMF, this is not enough. Cited in Friday’s issue of the independent newssheet “Mediafax”, the outgoing IMF resident representative in Maputo, Alex Segura, said that, while the Fund encourages the work, both of the PGR and of the parliamentary commission investigating the loans, this does not dispense with the need for an audit.

“We maintain our position that an independent and international forensic audit is necessary”, said Segura. “The government is assessing how international experts can support the investigations of the PGR. We agree with this approach. But the role of the international experts must be defined very clearly. In our view, the experts should produce an independent forensic audit report. This should in parallel and as a complement to the work of the PGR”.

Zandamela must certainly be well aware of this key IMF demand, since Nyusi recruited him from the IMF. Zandamela had worked at the IMF since 1988. Most recently he was head of mission for Djibouti and Somalia, in the IMF’s department for the Middle East and Central Asia. His previous posts included resident representative in Brazil, and head of mission in Armenia, Costa Rica, Gambia, Guatemala, Liberia, Malaysia, Nicaragua, Peru, Trinidad and Tobago and Zimbabwe.

In his initial contact with reporters, Zandamela said it was “premature” to announce what policies he would follow as governor. He would first have to discuss policy with the other members of the Bank’s board of directors, since he believed that the decision of a central bank should be taken, not by one individual, but by a collective.

Source: AIM