Donors open to resuming aid to Mozambique if there are reforms and transparency

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Donors open to resuming aid to Mozambique if there are reforms and transparency

12:31 CAT | 13 May 2016

The G14 group of donors to Mozambique’s state budget is open to resuming its suspended financing provided reforms and measures relating to transparency, stability and inclusive growth are implemented.

“Partners are open to considering the possibility of resuming budget support in the future and are available, together with the Government, to identify corrective measures and reforms that might restore confidence in national systems,” reads a G14 letter to the Mozambican government that news agency Lusa has access to.

The document, which formalizes the suspension of payments, was hand-delivered to the government on Monday by the Portuguese presidency of the G14, and its contents confirmed to Lusa by three international partners.

According to the letter addressed to the Minister of Economy and Finance, Adriano Maleiane, “partners consider that it is possible to identify in advance issues related to macroeconomic stability, fiscal transparency, functioning of the state’s business sector, accountability and probity in public life”.

As ramifications of those issues, the G14 points out “other areas that deserve concern”, listing the fight against corruption, political stability, civil liberties and human rights, as well as an environment that promotes inclusive growth and attracts private investment.

Donors also advocate dialogue with the government, and “perhaps most importantly, the mobilization of resources and definition of spending priorities in line with an agenda in favour of reducing poverty and promoting inclusive growth”.

The government of Mozambique acknowledged at the end of April the existence of undisclosed debts totalling US$1.4 billion (EUR 1.25 billion), which it justified on national security grounds.

The revelation of loans government-guaranteed loans contracted between 2013 and 2014 led the International Monetary Fund to suspend the second installment of a pre-agreed loan to Mozambique and cancel a visit to Maputo.

The G14 group of state budget donors also suspended its payments, followed by the US, which announced this week that it would review its bilateral support to the country.

In the letter formalizing the suspension, the G14 calls the “hefty debts” guaranteed by the government without the approval of parliament, “a violation of the Basic Principles of Partnership”, causing donors to conclude that “the necessary conditions for the disbursement of funds through general budget support are not currently in place”.

G14 members report that they are also in contact with other international partners, including members of the former G19 group, “to jointly examine potential adjustments in other forms of aid channelled through national systems”.

Aid partners have welcomed public statements by the Mozambican government, saying they represent “an important step in transparency” and welcoming the commitment of the executive “to continue to deal openly, promptly and in detail with this subject, notably in parliament”.

Including the recently disclosed loans, Mozambique’s public debt now stands at US$11.66 billion (EUR10.1 billion), of which US$9,890 million (EUR8.6 billion) is external. This represents over 70 percent of gross domestic product, up from the 2012 figure of 42 percent.

Source: Lusa