World Bank hopes to resume budget support

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World Bank hopes to resume budget support

7:56 CAT | 29 Mar 2017

The World Bank expects to resume direct support for the Mozambican state budget by the end of this year, according to the Bank’s resident director in Mozambique, Mark Lundell, cited in Wednesday’s issue of the Maputo daily “Noticias”.

Lundell, speaking on Tuesday at a lecture at the Higher Institute of International relations (ISRI) in Maputo, said “World Bank policy stresses budget support”. He wanted a high proportion of the Bank’s funding for Mozambique to take this form, and expected such support to resume by the end of this year, if not before.

The World Bank is one of the 14 donors and funding agencies who used to provide general budget support. But all 14 suspended disbursements of budget support when the scandal of government-guaranteed secret debts came to light in April 2016.

The previous government, headed by President Armando Guebuza, had issued illegal guarantees for loans of over two million US dollars by European banks (mainly Credit Suisse and VTB of Russia) to three quasi-public, security related companies – 850 million dollars for Ematum (Mozambique Tuna Company), 622 million for Proindicus and 535 million for MAM (Mozambique Asset Management).

Of these loans, only that for Ematum was in the public domain, since it took the form of a bond offer on the European market in 2013.

The over 1.1 million dollars lent to Proindicus and MAM in 2013 and 2014 was kept in deepest secrecy, thus misleading the Mozambican public and the country’s foreign partners as to the true state of the Mozambican foreign debt. The Ematum, Proindicus and MAM loans added 20 per cent to the foreign debt, and pushed it to unsustainable levels. The government is unable to meet its commitments under these loans, and has defaulted on them three times.

A condition for the resumption of normal relations between Mozambique and its foreign partners is an independent, international audit of Ematum, Proindicus and MAM. That audit is in the hands of the London branch of the US company Kroll, and its audit report should be delivered by 28 April.

Lundell seemed optimistic that relations would return to normal. He told his ISRI audience that over the next five years the World Bank intends to support 25 projects in Mozambique in 17 strategic areas.

“Noticias” cites Lundell as claiming this would be “an investment of approximately two billion dollars, and each project could have a budget of between 80 and 100 million dollars”.

He said that previous World Bank funding had led to robust economic growth, but admitted this had not produced the expected impact in raising living standards of the Mozambican population.

Source: AIM