Mozambique reinforces commitment to inclusive digitalization at international conference
Mozambique: First agreement with IMF since hidden debts scandal – AIM report
9:23 CAT | 30 Mar 2022
File photo: Macauhub
A mission from the International Monetary Fund (IMF) on Monday announced that it has reached “a staff-level agreement with the Mozambican authorities on a new arrangement under the Extended Credit Facility (ECF) for 2022-2025 to support sustainable, inclusive growth, and long-term macroeconomic stability”.
An IMF press release said that the mission, led by economist Alvaro Piris, held virtual meetings in January and February followed by an in-person mission to Maputo on 14-22 March to discuss a three-year program under the Extended Credit Facility (ECF).
In a statement issued at the end of the mission, Piris said this arrangement will involve IMF loans equivalent to 470 million US dollars.
The IMF suspended its programme with Mozambique in April 2016, following the scandal of the “hidden debts”. This term refers to the loans of over two billion dollars obtained by three fraudulent, security-linked companies from the banks Credit Suisse and VTB of Russia, on the basis of illicit loan guarantees issued by the government of the day under former President Armando Guebuza.
The IMF accused the Mozambican government of concealing the true size of its foreign debt, and suspended its programme. The 14 donors who provided aid to Mozambique in the form of direct budget support followed suit and suspended all further disbursements. Six years later, direct budget support has not resumed.
In a remarkable fit of amnesia, Piris said nothing about the hidden debts. His lengthy statement did not give any hint as to why the IMF programme had been suspended.
He avoided controversy by talking about natural disasters and terrorism instead. “In recent years the Mozambican economy has been hit by a series of severe shocks that risk intensifying vulnerabilities and worsening socioeconomic conditions”, said Piris. “Devastating terrorist attacks in the north of the country have displaced more than 800,000 people and delayed the development of liquefied natural gas (LNG) projects”.
The government, he added, “has managed to stabilize the security situation with assistance from bilateral and regional partners. Climate-change related cyclones and the COVID-19 pandemic have taken a toll on physical infrastructure and public health. Strong pandemic containment measures, paired with a successful vaccination campaign have allowed a gradual roll back of restrictive measures, while the government’s policies to mitigate the socio-economic impact of the pandemic benefitted from international support — all factors jointly contributing to a steady recovery of the economy”.
The government’s medium-term program, he said, “focuses on growth, fiscal sustainability, and reforms in public financial management and governance. The program balances providing financing with moderate adjustment that will rebuild policy space and reduce debt and financing vulnerabilities”.
Piris said, without going into detail, that “the agreed measures include a series of reforms to tax administration and VAT policy. On the spending side, the recently approved wage bill reform will, over time, reduce pressure on public finances from remunerating public servants and lead to convergence of the wage bill, as a ratio to GDP, towards average levels observed in the wider region”. In other words, the public sector wage bill will be cut.
Piris made clear the IMF’s support for a sovereign wealth fund for Mozambique, focused initially on the funds expected from the LNG projects.
He claimed that “addressing poverty and providing social protection are an important part of the government’s reform agenda”, and, as the special COVID-19 support programs wind down, “the IMF-supported programme includes space to fund an increase in permanent transfers to vulnerable households through the National Social Welfare Institute (INAS)”.
This staff-level agreement is subject to IMF management approval and IMF Executive Board endorsement.
Source: AIM
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