Mozambique’s fiscal policy pleases IMF

Post was last updated: November 18, 2016

Mozambique has taken “very important steps” in recent weeks to deal with the “hidden debts” inherited from the previous government, the Deputy Director of the Africa Department of the International Monetary Fund (IMF), David Owen, told reporters in Maputo.

Owen was speaking after he met with Prime Minister Carlos Agostinho do Rosario.

The “hidden debts” refer to loans of over $1.1 billion from European banks (Credit Suisse and VTB of Russia) to the quasi-public companies Proindicus and MAM (Mozambique Asset Management) that were guaranteed in 2013/14 by the government of the then President Armando Guebuza.

Owen was pleased that terms of reference for an audit of Proindicus, MAM and the Mozambique Tuna Company (Ematum) have been agreed between the Mozambican Attorney- General’s Office, the IMF and the Swedish government, which is financing the audit.

The US company, Kroll, has been chosen as the auditor. It has a reputation as the foremost company in the world for forensic audits. Owen expected the contract with Kroll to be signed very soon, after which it will have 90 days to complete the audit.

The IMF official praised the “significant tightening of macro-economic policy,” and particularly the dramatic rises in interest rates announced by the Bank of Mozambique in October. This, he said, had led to the stabilisation of the exchange rate of the Mozambican currency, the metical.

Such measures should be continued into 2017, Owen continued, but he warned of “the need to protect the poorest in society from the effects of fiscal adjustment”.

He noted that the government “has taken the first steps to talk to creditors about restructuring the private external debt”.

“We want to see the result of the audit, and progress in the discussions with creditors, so that we can be confident that Mozambique’s debt is set on a sustainable path,” Owen said.

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