Mozambique's external deficit widens in 2024 despite investment growth
The purchase of defence equipment is a sovereign issue, warns Mozambique’s former FinMin
1:13 CAT | 21 Apr 2016
Lusa (File photo) / Tomaz Salomão
Former Minister of Finance Mozambican Tomaz Salomão says that the Mozambican government and the IMF technical teams will define the type and volume of debt that the country has incurred.
Salomão believes that the IMF will be willing to work with the Mozambican authorities to clarify hidden debt, highlighting the fact that the purchase of defence equipment is a sovereign issue.
“Yes there is a willingness to work with Mozambique, based on consistent information, correct information that eventually the IMF may have. Following this exchange of information, the government will confirm whether or not the information that has been provided is accurate or not,” said Saomão, who held the finance portfolio from 1994 to 2005.
Salomão was a member of the Mozambican government team that negotiated the greatest debt pardon the country has ever had with international financial institutions.
“We’re all talking about debt,” he said. “But let’s be precise. Technicians will help to say if the debt results from efforts by the country to protect its coast. If we bought military trucks, helicopters and boats for coastal protection, then states are sovereign to take such decisions and protect themselves. There is nothing unusual or extraordinary in that,” stressed Tomaz Salomão.
The Mozambican prime minister acknowledged on Tuesday evening that the IMF had not been informed of a value greater than US$1 billion dollars of external debt of Mozambique, an attitude that the body considered an “important first step”.
Carlos Agostinho do Rosario met with the director general of the International Monetary Fund (IMF), Christine Lagarde, on Tuesday in Washington.
“The Prime Minister of Mozambique recognized that an amount exceeding US$1 billion dollars of its foreign debt guaranteed by the Government had not been previously disclosed to the Fund,” said the IMF, in a statement sent to Lusa.
According to the Fund, Christine Lagarde said that the disclosure of such information by the Mozambican authorities was an “important first step”.
Mozambique will provide more information and supporting documentation over the next few days to “establish the facts and allow the Fund to make a full assessment,” said the IMF.
“The Fund and Mozambique will work together constructively to assess the macroeconomic implications of this information and identify steps to restore trust,” adds the statement sent to Lusa.
The IMF cancelled on Friday a planned mission to Mozambique this week following the discovery of hidden debt and suspended payment of a tranche of US$155 million of a Fund’s loan to the country.
According to reports in the international press, Maputo allocated the money resulting from the undisclosed borrowings to the purchase of maritime defence equipment through the Proindicus company, participated by the state.
Source: Lusa
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There is a legitimate right to spend money on defence. What is however questionable is that decisions, monitoring and controlling processes of such spending and their outcome have been removed from the hands of the executive and parliament through an arcane funding structure put in place; effectively resulting in government and institutions having little or no control over the process and therefore corroding the public’s legitimate interest that their elected representatives be accountable.