Mozambique’s public debt now ‘unsustainable’ – GMD

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Mozambique’s public debt now ‘unsustainable’ – GMD

5:20 CAT | 03 May 2016

In File Club of Mozambique

The Mozambican Debt Group (GMD), a civil society organization that has been working on debt issues for many years, has denied the government’s repeated claim that the country’s public debt is still sustainable.

On Friday, according to a report in Tuesday’s issue of the independent newssheet “Mediafax”, the GMD held a conference on the debt, at which the main guest was Finance Minister Adriano Maleiane, and, using the official figures, calculated that the debt was now way over the sustainability levels.

The government had claimed that in 2015, the debt had reached 39.9 per cent of Gross Domestic Product. The limit of sustainability is regarded as 40 per cent, and so Mozambique was just 0.1 per cent away from this threshold.

But those figures were calculated before the revelations last month that the previous government, led by President Armando Guebuza, had not disclosed government guaranteed loans contracted by two state companies – Proindicus (622 million dollars) and Mozambique Asset Management (MAM – 535 million dollars).

The GMD pointed out that the government’s own figure for total public debt, of 11.64 billion dollars, given by Prime Minister Carlos Agostinho do Rosario at a press conference last Thursday, meant that the debt now stood at 69 per cent of GDP. The foreign debt is over nine billion dollars, and is equivalent to 53 per cent of GDP.

This is a conservative estimate: the ratings agency Fitch last week put the debt at 83 per cent of GDP, and warned that, if the Mozambican currency, the metical, continues to depreciate, the ratio could go to over 100 per cent of GDP later in the year.

The sustainability variables are clearly out of control, warned the GMD. Its document to the conference, cited by the paper, said “74 per cent of the debts contracted since 2012 are not concessional. The grant element (in foreign aid) has fallen from 80 per cent in 2005, to 52 per cent in 2012, and to less than 40 per cent in 2015. The period of grace has also fallen – from an average of 10 years in 2005, to an average of six years in 2012, and to less than five years in 2015”.

The GMD added that the period of maturity had shrunk dramatically – from an average of 37 years in 2005, to an average of 22 years in 2012, and to less than 20 years in 2015.

The GMD warned that this unsustainable level of public debt would have damaging effects, particularly on the poorest strata of the population, because the weight of debt servicing in the budget will lead to a substantial reduction in the amount of money available for public investment.

The GMD asked if the current government has any intention of holding anyone responsible for the undisclosed loans and the consequent dramatic expansion in public debt.

Maleiane replied that there are strong legal provisions to punish those responsible, if it can be shown that they acted illegally.

It was in the interest of the government, he added, to explain as clearly as possible the question of the public debt and, if anyone is found guilty, he will receive “exemplary punishment”. But for this to happen it was important to allow the institutions of the administration of justice to do their job.

It was these institutions that must decide whether any crime had been committed and must then sentence the guilty parties.

The Attorney-General’s Office has already announced that it is investigating Proindicus and MAM. A separate investigation began last year into the Mozambique Tuna Company (EMATUM), which acquired a government guaranteed loan of 850 million dollars in 2013.

Source: AIM