Mozambique – Secret Debt, IMF and donors outraged

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Donors stopped budget support and the IMF cut off its loan when the $2.2 bn in secret debt was revealed earlier this year. Budget support donors have left it for the IMF to negotiate a new agreement, so that deal will be at the top of Zandamela’s list – and his appointment itself is probably the first step in that negotiation.

Donors and the IMF have been calling for an international and independent forensic audit, which would identify over-pricing and commissions, and would be expected to point fingers at those who benefitted in the Armando Guebuza government. Government has resisted. When President Filipe Nyusi swore in Zandamela Thursday, he said pointedly: “do not be surprised nor alarmed by what may be pressure from outside. Mozambique is your land and it is for her that you should make your best efforts.” (Lusa 1 Sep) That seems a warning not to accept a forensic audit. Is that possible? The IMF has been taking a hard line, and departing IMF representative Alex Segura continued to demand a forensic audit. (Savana 2 Sep) The new resident representative is Brazilian Ari Aisen, who has been a senior economist at the IMF in Washington.

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But with two hard liners, Segura and the head of the Africa department, both leaving, there will be an entirely new negotiating team – with IMF people on both sides of the table. And Nyusi will try to calm the troubled waters when he meets IMF head Christine Lagarde in Washington in two weeks. The next IMF mission arrives in Maputo in three weeks.

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A probable deal would be to give the IMF everything it wants on the fiscal side in exchange for no forensic audit. That would probably involve taking all the debt onto the state budget. In a recent blog, Lagarde called for more structural reform and a renewed commitment to free trade. For Mozambique, the first would mean further privatizations and government austerity, including restrictions on government wages (which has been a continued IMF demand), while the second would prevent any attempt to protect Mozambican producers from foreign competition. But Lagarde again repeated something that has become a hallmark of her role in the IMF, which is the need to reverse increasing inequality. Segura unsuccessfully pushed this issue in Mozambique, and warned in January that “high levels of inequality hamper government policies to reduce poverty [and] can lead to political instability”. (Mozambique News reports & clippings 308) Will the new IMF team also push for reduced inequality?

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By: Josephn Hanlon

Via News Reports & Clippings

 

 

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