Former president Guebuza says Mozambique must trust institutions over public debt crisis

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Former president Guebuza says Mozambique must trust institutions over public debt crisis

12:44 CAT | 27 Jun 2016

Folha de Maputo / Former Mozambican president Armando Guebuza speaking to jounalists

Former president Armando Guebuza says country should trust the country’s institutions in relation to the public debt crisis

Former Mozambican president Armando Guebuza said on Saturday that the country could depend on the response of the authorities to the debt crisis caused by hidden loans taken on in the period when he was head of government.

“Our officials are addressing the situation and we can await their conclusions with confidence” Guebuza told reporters on the sidelines of Mozambique’s independence celebrations.

According to the former head of state, the country’s economic problems stem from the difficult international environment and natural disasters.

“The country should rise to meet these challenges with determination,” Guebuza said, adding that peace-building and the fight against poverty must remain central priorities.

“We have proved in the past that we are able to succeed, and I believe we will continue to succeed,” the former head of state said, reiterating the need for Mozambicans to trust the authorities.

The International Monetary Fund advocated on Friday that Mozambique should adopt an urgent and decisive package of measures to prevent further deterioration of the economy and warned that the country was in danger of debt distress.

“The [IMF technical] mission and the [Mozambican] authorities agreed that the context calls for an urgent and decisive package of policy measures to avoid a further deterioration in economic performance,” an IMF statement sent to Lusa on Friday at the end of the technical team’s visit said.

In particular, the IMF said, “substantial fiscal and monetary tightening, as well as exchange rate flexibility, are needed to restore macroeconomic sustainability, reduce pressures on inflation and the balance of payments and help alleviate pressures on the foreign exchange market while restoring balance between supply and demand on the foreign exchange market”.

“It was also agreed (between the IMF and the Mozambican government) that the adjustment should preserve critical social programs,” the press release adds.

The IMF’s end-of-mission report notes that Mozambique now has a high probability of having achieved a high level of risk of debt distress, with its public debt reaching 86 percent of gross domestic product at the end of 2015 as a result of US$1.4 billion in loans contracted by the Mozambican government between 2013 and 2014 and not disclosed to parliament or international financial organisations.

The organisation stresses that Mozambique faces difficult economic challenges, with economic growth in 2016 expected to fall to 4.5 percent, against 6.6 percent in 2015, almost 3.3 percentage points below historical levels, and substantial risk of projections falling further.

Source: Lusa