Mozambique will favour relations with Asia – EIU

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Mozambique will favour relations with Asia – EIU

6:54 CAT | 13 Sep 2017

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The Economist Intelligence Unit (EIU) believes that the Mozambican government will favour financial relations with Asian countries to compensate for the decline in donor support following the hidden debt scandal.

“The government will accelerate efforts to strengthen ties with Asian countries, notably China, which is one of the largest Mozambican lenders, and with gas and coal importing countries such as India, Japan and Thailand, which have companies which invested heavily in Mozambique,” experts from the economic analysis unit of the British magazine The Economist write.

These efforts, they warn in an analysis which partially focuses on Mozambique to which Lusa has enjoyed access, will be “hampered by the abundance in global energy markets, the weak business environment in Mozambique and, particularly in 2018 and 2019, by headwinds impacting the economy”.

The Economist analysts note that this is happening at the same time they were forecasting that international financial support would not return to pre-hidden debt crisis levels.

“Following the revelations in April 2016 of debt that was secretly and illegally contracted by public companies in 2013 and 2014, relations with donors will remain tense,” they predict.

“Even if the government commits itself to the International Monetary Fund’s scrutiny of its finances, we do not expect budget support to recover in the medium term to pre-2016 levels because of donor concerns about poor economic management on the part of the executive,” the analysts write.

The hidden debts scandal came in April 2016, with the disclosure of previously unreported state-guaranteed loans to Proindicus of US$622 million and MAM of US$535 million, throwing Mozambique into a crisis unprecedented in the last decades.

International partners suspended aid, the currency devalued steeply and inflation rose to 25 percent in 2016, impacting life in one of the poorest countries in the world.

The resumption of international aid was made conditional on an independent audit of debts, the executive summary of which was released by the Attorney General’s Office in July

Source: Lusa