IMF Visits Mozambique To Probe Secret Loans
Teams from the International Monetary Fund (IMF) have been in Angola and Mozambique this month, with an ongoing visit to the latter expected to focus on the country’s debt in the wake of secret loans taken out in recent years.
The IMF said its delegation to the capital, Maputo, will “continue the fact-finding process linked to the previously undisclosed borrowing and to assess the macroeconomic situation.” The June 16 to 24 visit follows a high-level meeting in April between the IMF and Mozambican government when the IMF publicly raised its concerns.
Lack of transparency is suspected of being a factor in the delay, now lasting well over a year, in taking a final investment decision on the $4.5bn Eni-led Coral floating LNG project – seen as a precursor for potentially tens of billions of dollars of investments in successive LNG ventures in the 2020s. The World Bank has estimated that by 2032 Mozambican resource revenues, mainly from LNG, could be $9bn/yr.
A recent Brookings report said that East Africa should take steps to avoid an oil and gas boom becoming a curse that widens inequality and entrenches corruption. On June 13, 26 non-government organisations said that the $1.86bn debt at the centre of a growing international controversy was “contracted illegally” and should not be repaid.
The 26 are organized into three campaign groups: Budget Monitoring Forum (FMO), Mozambique Debt Group (GMD) and Transparency and Fiscal Justice Coalition (CTJF). Their statement said that debts of Ematum ($850mn), ProIndicus ($632mn) and Mozambique Assets Management – MAM – ($535mn) “were contracted unconstitutionally, as they were not submitted to the Assembly of the Republic for assessment, approval and monitoring” by the government. It added that the Ematum debt was only entered in the State Budget in 2015, despite it being contracted in 2013.
FMO also called upon Mozambican authorities and the country's Administrative Court to investigate how the three companies incurred the debts, and to publish relevant findings. It noted that the UK recently began a probe into Credit Suisse and the Russian state VTB bank to determine whether or not they violated UK law by lending to the three firms.
The Mozambican NGOs’ initiative came as 200 anti-corruption leaders met at an international conference in France hosted by its justice ministry, with support from the OECD, UK and World Bank. The latter said the event is expected to generate new opportunities for exchange of ideas and information among participants from Africa, Europe and Central Asia.
Meanwhile as the IMF team arrived in Mozambique, another had completed a two-week mission from June 1 to 14 in Angola, led by Ricardo Velloso, Division Chief in IMF’s Africa Department.
Velloso said June 14: “The Angolan economy continues to be severely affected by the oil price shock of the last two years. Economic growth slowed to 3% in 2015 driven by a sharp slowdown in the non-oil sector. Inflation has accelerated and reached (year-on-year) 29.2% in May 2016, reflecting a weaker kwanza that has depreciated over 40% against the US dollar since September 2014, higher domestic fuel prices following the removal of fuel subsidies, and loose monetary conditions. The external current account balance has moved into deficit, although international reserves have been protected and remain at relatively comfortable levels.”
The outlook for 2016 remains difficult, he said, despite the rise of oil prices in recent weeks, with economic activity likely to decelerate further although a modest recovery could materialise in 2017.
Velloso said it was important to “encourage savings and private investment that will form the basis for private sector led economic diversification” and “critical to improve the efficiency and transparency of public spending, as the public sector will need to do more with fewer resources.”
Ricardo Velloso of the IMF's Africa division
Although the IMF team met the vice-president Manuel Vicente, finance minister Armando Manuel, central bank governor Valter Filipe da Silva and unnamed Sonangol officials, NGA was unable to elicit a public comment from the IMF about the recent appointment by the president, Jose Eduardo Dos Santos, of his daughter Isabel to head up Sonangol, the governance issues raised by such an appointment, about equity interests in banks and in Portugal’s Galp that could bear on her management of Sonangol, and whether these were discussed by Velloso and his team this month in Luanda.
Mark Smedley