The International Monetary Fund hopes an audit into Mozambique’s debt burden will be concluded in the next couple of weeks and that the government will publish the results, the head of the IMF’s Africa department said on Wednesday.
The fund is also looking to base any policies or programmes designed for the Central African economic bloc (CEMAC) around maintaining the currency peg the six nations hold against the euro, Abebe Selassie told Reuters in an interview.
Debt-ridden Mozambique, one of the world’s poorest countries, is struggling to repay loans of more than $2 billion that were not approved by parliament. The discovery of the loans prompted the IMF to halt a further loan last April, and led to the collapse of its currency and of investor confidence. The government appointed multinational risk management firm Kroll in November to investigate the hidden loans to state firms, and said it granted an extension to the investigation in February.
“We hope the audit will be finished in the next couple of weeks,” Selassie said in an interview on the sidelines of a meeting at think-tank Chatham House. Asked if he hoped the results of the audit would be made public, Selassie said: “In general, there is no better tonic against issues like this than transparency.” Speaking about the fund’s work with CEMAC countries, Selassie said recent engagements with the bloc – comprised of Cameroon, Gabon, Equatorial Guinea, Chad, Congo Republic and Central African Republic – to put in place policies and potential programmes had been “very constructive”.
“They have made it very clear that they want to maintain the peg and we agree that will be the anchor for policies,” he said, referring to the CFA Franc, which is tied to the euro at a fixed exchange rate with the peg guaranteed by the French Treasury. “So there will be significant fiscal reforms that need to be effected as well as reforms to promote growth and we are working on developing those with a number of the CEMAC countries.”
Effects of Devaluation
While many analysts believe CFA countries will ultimately benefit from a devaluation because it would make their exports more competitive, many inside the zone are concerned about more expensive food and fuel imports. The IMF already has programmes in place with Chad and the Central Africa Republic, and has initiated discussions with Cameroon and Gabon, with a recent mission to Congo expecting to result in discussions as well, said Selassie.
CEMAC leaders agreed in December to engage with the IMF to find ways to overcome macroeconomic instability caused in part by a fall in global commodity prices.
Meanwhile in Ghana, the government needed to first and foremost recognise the need to reduce the deficit quite significantly, said Selassie. “The debt level is high in Ghana, and it is going to be important to reduce the fiscal deficit and to avoid adding to debt,” he said. The West African country also needed to get a grip on the financing of its state-owned enterprises as well as reform public finances to ensure excessive spending in election years did not keep recurring.
“Unfortunately, this has been a feature of Ghana’s policies in the past few election cycles,” Selassie said. Just a few years ago, Ghana’s economy was one of the most dynamic in Africa, but it was hit hard starting in 2014 by a slump in global prices for its gold and oil exports. President Nana Akufo-Addo told parliament in February a three-year IMF programme aimed at stabilising national finances had failed to meet its objectives, placing the blame squarely on the government he defeated in elections in December.
Selassie confirmed that he expected economic growth across sub-Saharan Africa to come in at 2.8 percent this year and 3.7 percent in 2018.