Visit of IMF Director foreshadows new Policy Support Instrument for Mozambique

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Visit of IMF Director foreshadows new Policy Support Instrument for Mozambique

2:02 CAT | 11 Feb 2020

Photo: A Verdade

The visit by the Deputy Director General of the International Monetary Fund (IMF) to Mozambique foreshadows that the request for a new Policy Support Instrument (PSI) by the Government of Filipe Nyusi may be welcomed by the financial institution which suspended the previous one in 2016 after the discovery of the extent of illegal debts, writes ‘A Verdade’ today. “I am particularly excited to see that the economy is doing well,” said Tao Zhang, the first IMF director to visit Mozambique since 2016.

The elections are over, the President of the Republic has taken office, a new government is in office, Mozambique has resumed the payment of illegal EMATUM debts, and all conditions are in place for a request for a new Financial Programme to be accepted by the IMF.

“We had very good discussions – we covered a lot of subjects. I am particularly excited to see that the performance of the economy is doing well and the country is recovering well from the devastating impact of Cyclones Idai and Kenneth last year,” Tao Zhang said after meeting the Minister of Economy and Finance, Adriano Maleiane, and the Governor of the Bank of Mozambique, Rogério Zandamela on Monday (10-02).

The first International Monetary Fund director to visit our country since the discovery of the Proindicus and MAM illegal debts said he hoped “that (fiscal) policy reforms will continue in the coming years, particularly in terms of macroeconomic stability and governance”.

One of the main consequences of the discovery of illegal debts in 2016, which precipitated the economic and financial crisis that persists to this day, was the suspension of the IMF Financial Program that Mozambique enjoyed for breach of the obligations provided for in Section 5 of Article VIII of the PSI initialled in 2013.

At the time, Mozambique expected to receive the second tranche of the US$283 million Stand-by Credit Line, but, more importantly, a Financial Programme with the IMF would mean that the country is eligible for foreign investment and can access international markets.

Tao Zhang was not available to clarify whether a new PSI was the subject of discussions, and the Nyusi executive would not reveal whether they would ask for it together with a new Stand-by Credit Line, which are loans granted by the International Monetary Fund to poor countries with short-term balance of payments problems, such as Mozambique.

By coincidence or not, on Monday (10) the Attorney General’s Office announced that it had dropped judicial appeals in South Africa related to the extradition of former Finance Minister Manuel Chang to Mozambique.

Chang was Minister of Finance when he signed the Sovereign Guarantees that made the debts possible, and which the government failed to disclose to the International Monetary Fund when in 2014 it organized an unprecedented conference in Maputo, with the presence of the then director-general, Christine Lagarde, on “Mozambique Rising”.
@Verdade has established that an IMF mission is expected to visit Maputo next month, in yet another “Article IV Consultation” mission, and after which it is foreseeable that the government of Filipe Nyusi will formalise the request for a new PSI, and a new credit line.

By Adérito Caldeira

Source: A Verdade