No budget support from European Union

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No budget support from European Union

7:19 CAT | 20 Sep 2018

The EU has a fund of 300 million euros (about 350 million dollars) for Mozambique, which under normal circumstances would have gone to budget support. Stock photo / Alamy : European Union flags outside European Commission building at Berlaymont in Brussels, Belgium.

The scandal of Mozambique’s “hidden debts” is continuing to drain money away from the state budget.

The European Union, which used to be one of the largest donors of direct budget support, on Thursday confirmed that the suspension of budget support will continue into 2019, because the Mozambican government has still failed to account for the use of the two billion dollars lent by the European banks Credit Suisse and VTB of Russia in 2013 and 2014 to the security related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management).

Foreign Minister Jose Pacheco confirmed that the budget support remains suspended, after the new EU ambassador, Antonio Gaspar, had delivered his letters of accreditation to President Filipe Nyusi.

A imagem pode conter: 3 pessoas, fato — *EU ambassador to Mozambique, António Sanchez-Benedito Gaspar, today presented his credentials to Mozambique’s president Filipe Nyusi. Photo: EU in Mozambique*

Nonetheless, the EU is continuing to provide Mozambique with funds for project aid (a much more cumbersome and less efficient way of handling foreign aid than direct budget support). Pacheco said the EU has a fund of 300 million euros (about 350 million dollars) for Mozambique, which under normal circumstances would have gone to budget support.

“In the current phase, the funds cannot be used in this way”, said Pacheco. Instead, the EU would use the money to support “specific development projects”.

The Minister admitted that there is still work to be done to explain what he called “the peripheral debts”, and only then “can more efficient methods of financing be put on the table”.

The EU was one of the main players in the group of 16 donors who used to provide direct budget support. But when the true extent of the illicit loans became clear in April 2016, all 16 of these donors suspended further disbursements of budget support.

The loans to Ematum, Proindicus and MAM were illegally guaranteed by the previous Mozambican government, under President Armando Guebuza. Since the three companies are effectively bankrupt and thus have no way of repaying the loans, their debt just added an extra 20 per cent to the government’s foreign debt.

The government called in the world’s foremost forensic audit company. Kroll Associates, to audit the three companies. But the company managements obstructed the audit, necessary information was not forthcoming, and so the audit, undertaken in early 2017, could not be completed. To this day, no satisfactory explanation has been given for what happened to the two billion dollars.

Pacheco also confirmed that the EU is among those countries and organisations willing to support the demilitarisation of the former rebel movement, Renamo. This follows the announcement by Nyusi in Rome last weekend that six countries (which he did not name) had responded favourably to requests to assist with the disarming and demobilisation of the Renamo militia, and the reintegration of its members into Mozambican society.

Pacheco said, “an operation to pacify the country has financial and material implications. Some technical experience in demilitarisation and in integrating the people involved could also be useful”.

“A lot of countries have expressed an interest in supporting Mozambique in this process, in our current phase”, he added, without going into detail.

Nyusi also received letters of accreditation from the new ambassadors of the United Kingdom, Ireland, Spain, Holland, Congo, Saudi Arabia and the United Arab Emirates.

Source: AIM