Economists told Lusa on Wednesday that a financial assistance agreement [ Extended Credit Facility (ECF) ] with the International Monetary Fund (IMF) could allow the Mozambican government to recover and diversify foreign investment and consolidate macroeconomic stability.
The Mozambican government and the IMF announced last week discussions for “a possible financial programme” after the suspension in 2016 following the hidden debts scandal.
Economist João Mosca told Lusa that Maputo had “total interest” in a new financial assistance programme because it needs more foreign and diversified investment and needs to consolidate macroeconomic indicators.
“This possible financial opening by the IMF gives positive signals to investors because they start to believe that Mozambique is under the supervision of an entity that defends multinational capital,” said João Mosca, director of the Observatório do Meio Rural (OMR), a Mozambican non-governmental organisation.
On the other hand, he continued, if that international financial organisation resumes its flows to the state budget, investors will have confidence in the Mozambican government’s ability to control debt.
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“Mozambique is facing a debt crisis, and closer cooperation with the IMF creates grounds for believing in the restoration of debt sustainability,” he stressed.
João Mosca was sceptical about the impact of IMF financing on the fight against poverty – Mozambique is still among the poorest countries in the world – pointing out that the policies of international financial institutions have benefited large companies because they are aimed at infrastructures that enhance the exploitation of natural resources.
“As long as Mozambique is in crisis, it will have less negotiation capacity in the face of this set of conditions imposed by the IMF, donor countries and multinationals”, he stressed.
Economist Elcídio Bachita called the IMF’s willingness to negotiate a financial assistance programme for Mozambique a sign of confidence, pointing to reforms for greater transparency in the management of public resources and the trial of the biggest financial scandal in the country’s history, the hidden debts, as notable progress.
“Since the suspension of financial support to the country in 2016 due to the hidden debts case, the government has undertaken changes in favour of transparency and rigour in the management of state resources,” he emphasised.
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The IMF aid could “allow financial slack” for the government to make up the budget deficit and increase the resources needed for programmes impacting the fight against poverty.
“I think that the IMF is sensitive to the importance of its resources having an impact on correcting social imbalances. Unfortunately, it can happen that its aid is badly managed,” he said.
The economist noted that the inevitability of the start of the Rovuma natural gas projects and the raising of tax revenues also encouraged the IMF to be receptive to a financing agreement with Maputo.
“Only with confidence can you lend money to an over-indebted country. The IMF trusts that the country will raise enough resources to meet its obligations to its debtors,” he said.
Bachita said that external debt was currently the best option for the Mozambican government because mobilising internal debt was harmful to the economy.
“If it opts for internal debt, the state competes with the private sector in access to capital and dries up the resources needed to finance the economy,” noted Bachita.
The IMF was one of the partners to suspend direct aid to Mozambique in 2016 following the discovery of the state’s $2.7 billion (€2.4 billion) hidden debt scandal.
Financial injections to government coffers then resumed in the form of post-cyclone aid in 2019 and to tackle the pandemic in 2020.
