africa Banking Economy Finance Mozambique

Mozambique: IMF consider new medium-term financial package

The head of the International Monetary Fund’s Africa department said on Friday that the IMF may be prepared to consider a new medium-term financial aid agreement for Mozambique, if there is a definitive request.

“If there is a request for a medium-term programme, we will be happy to look at this subject and put it up for consideration,” said Abebe Aemro Selassie of financial aid to Mozambique, in a response to a question put by Lusa in Washington at a press briefing held during the IMF’s annual meetings.

The IMF has thus said, for the first time since the ‘hidden debt’ scandal broke in Mozambique, that the institution is ready to provide financial aid to the country once more.

Since the discovery of the debts – contracted by the previous government without the knowledge of parliament of existing creditors – the IMF has stressed the “need for an explanation to try to understand to what effect the debts were contracted and what resources were used,” the IMF director noted.

“It is good to see, more recently, the procedures that have resulted from investigations that the authorities… and other jurisdictions have undertaken,” he added, in a reference to criminal cases underway in the US as well as Mozambique.

Selassie added that “there has been progress in both areas, but there has not yet been a marked request for an IMF programme so far, the country has been going through an election as you know.” He recalled that the IMF had made clear from the outset that there had to be an agreement on “a programme with policies” that the Fund could support.

The IMF in 2016 suspended a financial assistance programme that had foreseen aid of $282.9 million in several tranches, in the wake of the discovery of over $2 billion in hidden debt.

“As a result of the hidden debts, the [sovereign] debt was in an unsustainable situation and there had to be a way to ensure that the debt was brought to sustainable levels,” Selassie said on Friday.

He recalled that in the wake of Cyclone Idai, which hit Mozambique in March and had “devastating effects” on the country, that the IMF had “moved quickly to provide some help to the country” in the form of emergency aid and policy advice, which has continued.

Idai made landfall in central Mozambique on 14 March, leaving 603 dead. The IMF responded with an emergency loan of $118.2 million.

In May 2016, the IMF’s then director-general, Christine Lagarde, said in an interview with the BBC that the suspension of Mozambique ‘s funding was justified by clear signs of corruption.

Prosecutors investigating the hidden debts case allege that the $2.2 billion in finance secured by public enterprises Ematum, Proindicus and MAM under the previous president, Armando Guebuza, represents vast corruption and money laundering .

Several people have been detained as part of this investigation, including the former minister of finance, Manuel Chang, who is being held in South Africa while he faces extradition requests from the authorities in both Mozambique and the US.

Source: Lusa via Club of Mozambique

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