IMF has ‘good understanding’ with Mozambique over debt audit

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IMF has ‘good understanding’ with Mozambique over debt audit

2:00 CAT | 10 Oct 2016

IMF (File photo) / Abebe Selassie, Director of IMF's African Department

The International Monetary Fund has a “very good understanding” with Mozambique’s government about the requirements for a planned audit into $1.4 billion of hidden debt uncovered this year, said Abebe Aemro Selassie, African department director at the fund.

“There’s a good agreement between the government and the IMF on some of the key prerequisites for the audit,” Selassie said in a transcript posted to the IMF’s website. “There will be an independent audit undertaken of the loans that have been taken up by state-owned enterprises, and this audit will be made public.”

The fund froze lending to Mozambique and foreign donors halted aid after undisclosed loans came to light in April that were equivalent to 10.7 percent of the country’s gross domestic product. The Washington-based lender says it will only resume financial assistance if the audit starts soon. The hidden debts and a drop in commodity prices have hit the southern African nation’s economy hard, with the IMF forecasting growth of 3.7 percent this year, the slowest pace in 16 years, compared with 6.6 percent in 2015.

The planned audit could help ease economic strain, Candy Mazzuchetti, a country risk analyst at Rand Merchant Bank in Johannesburg, said in reply to e-mailed questions Oct. 4.

‘Key Concern’

“Transparency around public finances has been a key concern in Mozambique in recent months, so any progress with regard to an independent, international audit will be well received,” she said. “The IMF and the international donor community play a key role in the Mozambican economy, so any constructive momentum or reaction would have a positive impact on macroeconomic pressures.”

Even as growth slows and the coal-producing nation struggles to pay interest on its dollar debt amid dwindling foreign-exchange reserves, the government could boost expenditure by 12 percent to 272.3 billion meticais ($3.5 billion) next year, according to government budget documents. Expenditure in 2017 will be 33.9 percent of GDP, 1.5 percentage points less than this year’s planned disbursement, according to the document that’s currently before a parliamentary budget committee.

Source: Boomberg