IMF wants to work with Mozambican authorities to assess implications of undisclosed debt

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IMF wants to work with Mozambican authorities to assess implications of undisclosed debt

4:14 CAT | 20 May 2016

The International Monetary Fund (IMF) has announced that it intends to continue working with the Mozambican authorities to “constructively” assess the macroeconomic implications of undisclosed debt.

“Since the Mozambican authorities confirmed the existence of a large amount of debt which had not been notified to the Fund, the authorities have worked closely to ascertain the facts,” IMF spokesman Gerry Rice told a news conference at the headquarters of the Fund in Washington.

“In the next steps, we will work with the authorities to assess constructively the macroeconomic implications of these revelations,” he added.

Rice confirmed that an IMF technical team would visit the country in June, adding that the visit was originally scheduled to take place in April, but was postponed when the undisclosed loans information came to light.

The team will continue to gather facts and information, carry out investigations if necessary and assess the macroeconomic implications. As for the conditions, “all this will be discussed during the mission,” the IMF spokesman said.

Asked if it was possible that the IMF will grant Mozambique a bailout, Rice said that the Policy Support Instrument (PSI is being reviewed and this is something that ” will be discussed during the visit”.

The PSI is an IMF instrument designed for countries that do not need financial support for their balance of payments. According to the Fund, it “is available to low income countries that have broadly achieved and maintained a stable and sustainable macroeconomic position, including debt sustainability, consistent with poverty reduction and strong and sustained growth”. It helps countries design effective economic programs that, once approved by the IMF Board of Directors, are welcomed by donors, multilateral development banks and markets as a signal that the Fund endorses the member country policies.

Ematum, in 2013, was the first known case of a state-guaranteed loan incurred without being registered in the public accounts.

The Mozambican government in April acknowledged the existence of a previously undisclosed debts of US$1.4 billion (EUR 1.25 billion), which it justified on national security grounds.

The revelation of 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 group of international donors, currently chaired by Portugal, also suspended aid to the state budget of Mozambique.

The World Bank and the UK also announced the suspension of their funding.

Source: Lusa