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MOZAMBIQUE’S PUBLIC DEBT DISASTER:

Will the Government Mozambique’s continue to

public debt disaster:

avoid fiscal transparency?

The session on debt scheduled with the National Assembly for

late June/early July is too little, too late.

Will the

Government

continue to

avoid fiscal

transparency

In recent weeks Mozambique has made headlines in major international economic newspapers

because of its economic conditions and its external debt. The Center for Public Integrity (Centro

de Integridade Pública, CIP), within its investigative pillar covering public expenditure, plans

to produce several articles in order to promote an informed and responsible public debate on the

subject of external debt. In view of the recent facts reported by the international media and press

releases of the Mozambican Government, CIP calls for the Government--independently of the

discussions held in Washington--to immediately inform the citizens of Mozambique of the facts

regarding the question marks that have arisen surrounding the public debt, through a

comprehensive explanation of the debts of EMATUM / Pro-Indicus / Mozambique Asset

Management (MAM), and any other debts that may surface.

THE SESSION ON DEBT SCHEDULED WITH

THE NATIONAL ASSEMBLY FOR LATE JUNE/

• The International Monetary EARLY JULY Fund IS (IMF) TOO LITTLE, announced TOO in LATE. mid-April that misgivings have

arisen as to the information provided by the Government to the IMF on the external debt of

Mozambique. This followed a Wall Street Journal article of April 3 rd , 1 which revealed new

debt, not previously disclosed, for a little-known security and national defense company

called Pro-Indicus, and a never before heard of company called Mozambique Asset

Management (MAM).

A. CIP’s Public Debt Issues Raised for Discussion

In recent weeks Mozambique has made ported by the international media and press

headlines in major international economic releases of the Mozambican Government,

newspapers because of its economic conditions

and its external debt. The Center for discussions held in Washington--to immediately inform

CIP calls for the Government--independently of the

Public Integrity (Centro de Integridade Pública, the citizens of Mozambique of the facts regarding the

CIP), within its investigative pillar covering question marks that have arisen surrounding the public

debt, Wall through Street a comprehensive Journal. explanation of the

1

“Tuna and Gunships: How public $850 Million expenditure, in Bonds plans Went to produce Bad in several Mozambique”,

articles in order to promote an informed and debts of EMATUM / Pro-Indicus / Mozambique

responsible public debate on the subject of Asset Management (MAM), and any other debts that

external debt. In view of the recent facts re-

may surface.

• Pro-Indicus, S.A, has as its stated objective to provide security services to oil companies

and help protect shipping, while MAM, S.A. has as its stated objective to provide services

to Pro-Indicus. The MAM loan apparently includes funds for the Pemba Logistical Base, a

Anti-corrupção • Boa governação • Transparência • Anti-corrupção • Boa governação


A. CIP’s Public Debt Issues

Raised for Discussion

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA

1

“Tuna and Gunships: How $850 Million in Bonds Went Bad in

Mozambique”, Wall Street Journal.

• The International Monetary

Fund (IMF) announced in mid-

April that misgivings have arisen

as to the information provided

by the Government to the IMF

on the external debt of Mozambique.

This followed a Wall

Street Journal article of April 3 rd

1

, which revealed new debt, not

previously disclosed, for a littleknown

security and national

defense company called Pro-Indicus,

and a never before heard

of company called Mozambique

Asset Management (MAM).

• Pro-Indicus, S.A, has as its stated

objective to provide security services

to oil companies and help

protect shipping, while MAM,

S.A. has as its stated objective

to provide services to Pro-Indicus.

The MAM loan apparently

includes funds for the Pemba

Logistical Base, a military installation

that is supposed to service

the boats purchased by a loan to

EMATUM, originally issued in

2013. Pro-Indicus is owned by

the same three public concerns

that own EMATUM – the Institute

for the Management of

State Holdings (IGEPE), the

public fishing company Emopesca,

and GIPS (Investments,

Holdings and Services Management).

Although the latter is a

limited company, it is mostly

owned by the social services of

the State Intelligence and Security

Agency (SISE). As for MAM,

Finance Minister Adriano Maleiane

has said publicly that it is

98 per cent owned by GIPS, one

per cent by EMATUM and one

per cent by Pro-Indicus.

• In a statement on Friday, April

15, the Director of the African

Department of the IMF, Antoinette

Sayeh, said the IMF has requested

the Government for an

explanation of these debts not

previously disclosed “of over a

billion dollars.” Meanwhile, the

IMF evaluation mission of the

Stand–by Credit Facility (SCF,

the financial program with Mozambique

for some 280 million

The year 2016

will be even

more difficult,

even though

the Government

Budget approved

for 2016 indicates

higher levels of

revenues than

those realized in

2015

2

dollars approved by Executive

Board of the IMF in December

2015), which had been scheduled

for late April / early May, has

been suspended until the IMF

has received satisfactory clarification

of these debts.

• A team from the Ministry of

Economy and Finance and of

the Bank of Mozambique has

flown to IMF headquarters in

Washington to clarify the situation.

The Minister of Economy

and Finance, Dr. Adriano Maleiane,

said in this context that

“There was some confusion

[with respect to debt of EMA-

TUM] that ended up causing

unnecessary noise for Mozambique.

Everything that has government

guarantee is guaranteed.

We take responsibility for all that

has been guaranteed by the Government.

This is the peace that

I continue to give to investors”.

• CIP is following these developments

with great concern.

Since 2014, the Mozambican

economy has been suffering

from a significant drop in total

earnings, including foreign

exchange income, which has a

direct impact on the financial

health of the country’s economy

in general and on public finances

in particular.

• The year 2016 will be even more

difficult, even though the Government

Budget approved for

2016 indicates higher levels of

revenues than those realized in


Dr. Adriano Maleiane

Créedito: infodiario.co.mz

2

“Analysis of the 2016 Budget Proposal: a Macroeconomic Point

of View” (in Portuguese) and “Faults in the 2016 Budget Approved

by Parliament” (in English and Portuguese).

2015. In two publications, 2 CIP

has questioned both the 2016

Budget Proposal sent to the National

Assembly and the Government

Budget 2016 approved

by the National Assembly. In

particular, CIP has raised questions

regarding the soundness

of fiscal projections: CIP did not

consider it realistic to increase or

even maintain levels of revenue

linked to the international trends

at a time when the international

environment is deteriorating.

In fact, during the time when

CIP expressed its concerns (between

October 2015 and February

2016), the Gross Domestic

Product (GDP) growth rate for

Mozambique for 2016 was lowered

from 7% to 5.6%. In March

2016, the Minister of Economy

and Finance himself admitted

that GDP growth could decline

to 5%, and the “Economist Intelligence

Unit” (a specialized

British journal) estimates Mozambican

GDP growth of 4.8%

for 2016. CIP maintains its position

that the estimates presented in the

2016 Budget are not realistic.

• The (so far temporary) suspension

by the IMF of its SCF program

will impact Mozambique

directly through the non-disbursement

of foreign exchange

by the IMF. The announcement

itself also has a strong impact

on the disbursements of Mozambique’s

other development

partners and, even worse, by the

private sector. Investments programmed

by the foreign private

sector will surely decrease, which

will immediately further affect

foreign exchange income for the

country. In addition, the expectations

of economic agents in

Mozambique will be influenced

by recent events, which has an

immediate negative impact on

the exchange rate - a factor that

is already being observed (the exchange

rate in the informal sector

was MT 61.90 on Wednesday,

April 20).

• The Mozambican people deserve

a detailed and timely clarification

of the discrepancies

noted in the press releases by the

IMF and the Government (see

Annex 1, Press statements by the

IMF and Government ):

The IMF says that the

“…borrowing …had

not been...disclosed...

We have advised the

authorities that any undisclosed

debt-related

transactions, irrespective

of their purpose, need

to be reported transparently

and publicly. Such

disclosure is essential

to ensure full accountability

of the Govern-

3

ment to its citizens and

to Parliament ...” The

Minister of Economy

and Finance says that

the debt now acknowledged

has never been

hidden. It is a loan of

622 million dollars given

to Pro-Indicus with a

government guarantee.”

In other words, aside

from the debt to EMA-

TUM, the Government

has guaranteed the debt

of yet another company.

Maleiane explains that the

debt appeared hidden because

the banks that loaned the

money did not report it to the

investors.” The Minister

admits that the investors

were not informed. He

omits that the Mozambican

people were also not

informed - at no time did

the Government notify

either the people or the

National Assembly of a

debt incurred on behalf

Pro-Indicus! Moreover,

the Minister of Finance

only referred to Pro-Indicus

after this debt was

publicized by the international

press. In addition,

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA


the Minister makes clear that

investors would be the only

ones interested in knowing

the debt of Pro-Indicus,

excluding categorically the

people of Mozambican!!!

The IMF says that “The

loan that was not made public

exceeds one billion [thousand

million] dollars”, while

Minister Maleiane says:

“This is a loan of 622 million

dollars given to Pro-Indicus”.

There is, therefore a discrepancy

in the amount of some

400 million dollars that must

be explained.

A statement by the Office

of Prime Minister

Agostinho do Rosario says

that “The Prime Minister

will also confirm the total

debt contracted by public

enterprises with government

guarantees that do not appear

in the statistics and

were not reported to the

IMF in the context of the

current economic program,

for reasons to be discussed

during the above-mentioned

meetings.” The statement

seems to indicate that there

is debt that does not appear

in the statistics (and that was

not reported to the IMF), in

direct contradiction to the

statement of Minister Maleiane.



The three press statements

mentioned above, namely,

those of the IMF, Minister

Finance and Prime Minister,

show a lack of interest by the

Government in allowing the

citizens of Mozambique to

have access to information

on the economic and financial

situation of the country.

While the IMF urges the

Government to disclose the

real economic and financial

situation to the Mozambican

people, the Minister shows

his concern about accountability

to investors, giving the

impression that the information

circulating in the national

and international press

is just a misunderstanding;

in turn, the Prime Minister is

concerned with admitting to

the IMF that there is a debt

contracted by public enterprises

that does not appear in

the statistics reported to this

Bretton Woods institution.

CIP also wants to emphasize

that neither the debt incurred

on behalf of EMATUM in

2013, of which the citizens

of Mozambique also learned

in a not very transparent

way from the Government,

nor these new debts, were

approved by the National

Assembly. This omission

by the Government to not

comply with and respect

the legal and judicial framework

established within the

democratic framework of

Mozambique, also referred

to in a recent article by CIP,

3

is in itself a huge concern

for civil society. In a recent

development, the Permanent

Commission of the National

Assembly (Commisão Permanente

da Assambleia da Republica,

CPAR) has requested that the

Government appear on June

22 to explain the transactions

regarding the hitherto

undisclosed debts. While CIP

supports the effort of the National

Assembly to seek clarification

from the Government, it deplores

the fact that the session is only

scheduled for June 22, virtually at

the end of the first semester of the

fiscal year. Furthermore, the

actual interpellation will most

likely take place only after

that date, since it depends

on the Points of Order the

Assembly has set for itself;

it could occur as late as end-

July. CIP is concerned that

by that time the pressure

will have been taken off the

Government, and the session

could turn into a stilted formal

appearance, which would

not yield the answers that the

people of Mozambique seek.

CIP urges the Government to

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA

3

See the Article (in Portuguese): “The Government must clarify

the alleged existence of the Pro-Indicus Debt” in: http://

www.cip.org.mz/article. asp?lang=&sub=crrp&docno=457.


make a full and transparent

presentation to the National

Assembly of the public debt

transactions during the last

three years, requesting its

authorization for the debts,

so that the people of Mozambique

are informed by

the most correct means in the

framework of our democratic

processes.

In developments in late April/early

May, the G-19 4 has harmonized the position

of its member countries and suspended

its budget support operations

with Mozambique, at least until the

IMF has indicated that it is satisfied that

the financial program can be resumed.

The same position has been taken by

the United States (USAID), which is

not part of the G-19. The 2016 Budget,

as approved by the National Assembly,

envisages 11.9 MMT as budget support

funds, equivalent to 1.8% of GDP. 5 If,

in the worst case scenario, no budget

Maleiane

explains that the

debt appeared

hidden because

the banks that

loaned the

money did not

report it to the

investors.”

support funds are disbursed in 2016, to

maintain the overall deficit (as shown in

the 2016 Budget) of 69.7 MMT, equivalent

to 10.2% of GDP, would imply

increasing domestic financing by 11.9

MMT. Such an increase in domestic

credit, which implies printing money,

would have an adverse impact on inflation

and the exchange rate, among

other macroeconomic variables.

The 2016 Budget still assumes GDP

growth of 7.0%, whereas even the Minister

of Finance in late March 2016 announced

a growth rate of 6% as more

realistic. In fact, CIP believes that under this

current scenario GDP would grow by even less,

making it almost certain that the deficit will

noticeably exceed the 10.2% ratio to GDP.

Therefore, since the 2016 Budget could not be

financed in its present form, CIP considers it

a certainty that fiscal measures (regarding revenues

and/or expenditures) will be taken.

Following the return of the Government’s

economic teams from Washington,

on April 28 the Prime Minister

Carlos Agostinho do Rosario has ac-

Box 1. Key Elements of Budget Support

According to the Memorandum of Understanding (MoU) between the

partners of the General Budget Support (GBS) Group, the G-19, dated September

2015, and the Government of Mozambique, the main objective of

the General Support to the State Budget is to contribute to poverty reduction

and inclusive growth in Mozambique, supporting financing, implementation

and monitoring of the five-Year Government Plan and its Strategic Matrix.

There are four priority areas of the GBS: national systems, inclusive growth,

governance and accountability, and efficiency in service delivery.

While budget support funds are not earmarked for specific projects,

the MoU states that GBS funds aim to foster “macroeconomic and fiscal

management; public sector systems for service delivery and accountability;

and supporting SME development and growth in key productive

areas.”

Therefore, the impact of non-disbursement of GBS funds would

affect general macroeconomic variables that would put the whole

fiscal policy strategy of the Government under stress.

4

The G-19 for 2016 comprises the African Development Bank (AfDB), Austria, Canada, Denmark, European Union, Finland, France, Ireland, Italy, Portugal, Spain,

Switzerland, Sweden, United Kingdom, World Bank.

5

República de Moçambique, “Proposta de Orçamento do Estado para 2016”, Maputo, Dezembro de 2015, Versão Aprovada pela Assembleia da República.

Créedito: @ ematum

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA


knowledged in an address to the Mozambican

people the existence of the

loans but has justified their necessity

from a economic point of view. Following

that speech, the Minister of Finance

announced in early May that the

Government will prepare measures to

cut expenditures, which apparently will

include a freeze on hiring, travel, fuel

vouchers, and “others that do not compromise

the normal functioning of the

state apparatus”. 6

In further developments, Credit Suisse,

one of the banks having lent the money

to the government, has been accused

as complicit in the hiding of the information

on the loans. Tim Jones, policy

officer at Jubilee Debt Campaign 7

said: “Credit Suisse is responsible

along with the Mozambican government

for these debts being hidden

from the Mozambican people and the

IMF. It is unjust to lend money for

military purposes, and irresponsible

and undemocratic for such debts to be

covered up. Credit Suisse and [the Russian

bank] VTB should pay the price

for these illegitimate loans, and should

not be bailed out by the IMF or anyone

else.”

As a result of these developments,

Fitch, the international credit rating

agency, lowered the rating for Mozambique

from B to CCC due to the

“abrupt deterioration of the public

debt profile”.

B. Why it is important to have complete information

on the public debt of Mozambique

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA

The fact that the IMF suspended the

arrival of a mission that was to have

reviewed the implementation of the

financial program with Mozambique is

drastic and happens only rarely in the

relations between the IMF and its member

countries. It occurs, as in this case,

when doubts arise about the macroeconomic

parameters incorporated in the

financial program, such as the case of

the magnitude of the public debt and

the projection of its repayments.

Here, then, are the reasons why the

IMF has taken this drastic step:

The IMF provides financial programs

to countries that need help when faced

with unanticipated economic problems,

such as declines in the prices of their

export products that have resulted in

liquidity problems for the Government

– as in the case of Mozambique. To

access the IMF credit, a country must

present a macroeconomic program that

resolves the short-term financial problems

(urgent lack of foreign exchange /

liquidity of the Government) by adjustment

measures for the short, medium

and long term.

In preparing an adjustment program,

the IMF together with the Government

agree on projections for the future (with

emphasis on the next 2-3 years) of the

so-called macroeconomic variables, notably

growth of production in the economy

(GDP); the budget deficit (which

determines, ultimately, how many meticais

the Government will borrow from

the Bank of Mozambique, i.e., printing

money); changes in the monetary base;

interest rates; inflation; exchange rate;

deficit of the balance of payments; and

others.

It is important to note that in order

to approve a financial program with a

country, the IMF needs to make sure

that this program will be fully funded.

This involves taking into account all the

Government’s own resources (mainly

taxes), financial assistance from development

partners (grants and concessional

loans) and a certain amount of

credit from the Bank of Mozambique

(limited to a level that is consistent with

the targets for inflation and depreciation

of the exchange rate, among other

variables) to arrive at the deficit that

can be financed under the assumptions

used for available resources.

The projections of each of the macroeconomic

variables are interrelated,

that is, if the budget deficit increases,

so does the monetary base, interest

rates, inflation, depreciation of the exchange

rate, etc. It is also true that if

there is an increase in, e.g., the inflation

target, the deficit can be increased.

Therefore, the key criterion to arrive

at the level of the macroeconomic

variables appropriate for the economy

is that it must protect the purchasing

level of the population - that is, inflation

and currency depreciation should

decrease in the short term, or at least

over the medium term.

An important element in the calculation

of the budget deficit is public debt payments

- interest and depreciation. Since

they are outlays, increases in them (just

like declines in the collection of taxes,

unforeseen expenses, etc.) increase the

6

budget deficit and, together with the

availability of financing, determine the

maximum magnitude of the deficit.

If suddenly debt surfaces whose service

(interest payments and amortization)

was not taken into account in calculating

the budget deficit, it implies that these

payment requirements are added to the

deficit already established. But in increasing

the deficit it is no longer possible

to maintain the targets set beforehand

for the money supply, interest rates, 8

inflation, depreciation of the exchange

rate, etc. At this moment, the program

becomes a non-funded program - and

the IMF stops the program to understand

what happened and how to restore

the balance of the macroeconomic

variables.

The SCF program approved by the IMF

in December 2015 entered this situation

during the week of April 11. When

new debts arose that previously had not

been known and therefore whose payments

had not been projected, the IMF

needed to know the amounts involved.

What we are given to understand from

the IMF press conference is that until

then the IMF had a total lack of knowledge

about the terms of this debt (interest,

amortization, payment period

- the terms of those loans).

A certain element of distrust has also

now arisen in the process: if it was possible

only now to discover these debts

not previously reported, how can the

IMF be sure that more transactions

of this type will not show up later and

unhinge the funding of the agreed program?

6

O País, May 6, 2016.

7

The Jubilee Debt Campaign is a nonprofit organization in Great Britain involved in international debt issues.

8

In fact, the Monetary Policy Committee (Comité de Política Monetária, CPMO) of the Bank of Mozambique, in its Communiqué Number 04/2016 of April 20, 2016, which describes the provisional

developments in Mozambique’s economy until March 2016, reports that “the monetary base, that is the operational variable of monetary policy, increased by 343 million meticais, to 70,297 million,

which in terms of average balance corresponds to a deviation of 3.746 million meticais (+ 5.6%) from the indicative target for the period. “Also, the CPMO announced an increase in interest rates

for the Permanent Marginal Lending Facility from 10.75% to 12.75%, an increase of 200 basis points, i.e., an increase of 2 percentage points.


To put into perspective the importance

of the Government’s external debt, we

want to mention some features:

• Debt payments (interest) related

to the external debt in

the Government Budget in

2016 are 5.3 billion meticais

(mil milhões meticais, MMT),

which together with the external

debt amortizations of

8.7 MMT total 14.9 MMT.

This represents 6.2% of total

spending, 2.0% of GDP and

5.9% of exports of goods. 9 The latter ratio of debt payments

to exports of goods

is of particular importance

because it is directly linked to

the foreign exchange earnings

of Mozambique. Compared

with other countries in the

region, the ratio is not (yet)

extreme: in 2014, Zambia had

a ratio of 3.7%, Malawi 4.2%

South Africa 8.6% and Angola

10.7%.

What is of concern is that

between the version of the


Proposal of the 2016 Government

Budget and the version

approved by the National Assembly,

debt service payments

increased by 23.7%, from 10.1

MMT to 12.5 MMT. Yet, in

2015 this item was only 5.5

MMT and in 2014 only 3.7

MMT. The sharp increase in

these payments is therefore

worrying, since it is occurring

before even taking into account

the new debts that have

arisen.

C. With the exploration of natural gas in the Rovuma

Basin, can Mozambicans get some benefit aside

from only payments of public debt service?

7

In the end, the IMF is not only concerned

about financial aspects but also

about transparency. That is why in the

press statement of April 15 the IMF

urges the Government “…that any

undisclosed debt-related transactions,

irrespective of their purpose, need to

be reported transparently and publicly.

Such disclosure is essential to ensure full

accountability of the Government to

its citizens and Parliament, allow an accurate

assessment of the previously undisclosed

debt on the macroeconomic

outlook...”

Transparency, in turn, is important so

that Mozambican citizens can have a notion

of what is sovereign debt. Sovereign

debt “is debt assumed or guaranteed by

a sovereign entity (Government or its

Central Bank) ... and repayment possibilities

are therefore closely linked to

the fiscal capacity of the issuing country

and therefore its economic performance

and budget management. These criteria

determine the risk ratings of sovereign

debt, and the debt to GDP ratio is

one of the bases of this assessment.” 10

It means lenders, upon giving these

loans, positively assessed the country’s

repayment capacity (probably based on

expectations of revenues from liquefied

natural gas, LNG), and, by not having

the expected flow of foreign exchange,

the direct impact will be on increasing

the budget deficit and consequent deterioration

of the indicators mentioned

above. Therefore, it is important to disclose

what is the real impact of debt

payments in the absence of a significant

inflow of foreign exchange, and, if there

are no foreign exchange inflows, what

the real benefits are for Mozambicans

from the exploitation of natural gas in

the Rovuma Basin, aside from public

debt service.

Based on IMF projections, 11 the fiscal

revenues of the projects would be

significant only as of the mid-2020s (p.

25). If the growth in future revenues

related to LNG production is only realized

after 2025, especially from the mid

to late 2020s, it is critical that resources

are carefully managed. Table 1 (page 12

of the Annex on External Debt Sustainability

Analysis) indicates that the ratio

of tax revenue to GDP is projected to

increase in a range of only between

9

The figure of the 2016 GDP of 673 MMT was taken from the IMF report (Staff Report for the…Request for an 18-Month Arrangement under the Standby Credit Facility), Number 16/9, January

2016. The ratio of debt payments with respect to exports of goods was calculated using the projected figure for exports of goods in the same IMF report (3.643 million), converted at an average

exchange rate for 2016 of 65 meticais / dollar, projected by CIP.

10

https://pt.wikipedia.org/wiki/D%C3%ADvida_ soberana.

11

Staff Report for the…Request for an 18-Month Arrangement under the Standby Credit Facility, Number 16/9, January of 2016.

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA


Créedito: @ ematum

27% in 2020 to 27.6% in 2025. The

report says: “Even though the gas production

would rapidly scale up during

the early 2020s, fiscal revenues during

the first few years are limited, because

of the large cost recovery for continuous

investments in building liquefaction

plants” (Box 1 of the mentioned Annex).

Moreover, these projections were

made in late 2015, and since then the

international situation has deteriorated

as regards LNG prices. The report specifically

cites a number of risks that may

affect the projections in a negative way,

such as sale prices of gas that could

fluctuate and fall below assumptions; a

lasting slowdown in the world economy

that could trigger further declines in

international gas prices; postponement

of activities of the companies involved

in mega-projects. Notably, budget revenues

could be particularly sensitive to

falling gas prices, because most of the

revenue is related to the profits of the

projects. CIP emphasizes that this implies

that for payments of the original (known) debt

of EMATUM, which is subject to a single

payment in 2023 (“balloon payment”) of

about 727 million dollars (equivalent to 38.3

MMT at the current official exchange rate and

21.7% of state revenues budgeted for 2016),

the Government would not yet have the necessary

own resources. Payment of the debt under

the current assumptions would require a strong

domestic credit component -- that is, an increase

in inflation and the exchange rate. This component

will augment further when including the

payments of the recently “discovered” debt,

i.e., the one for Pro-Indicus and the other one

linked to the Pemba Logistical Base, for which

it is still not even known how onerous the terms

of these debts are.

D. Conclusions

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA

The fact that the Government did not

disclose certain external debts during

the negotiations with the IMF is a disaster

that goes beyond numbers. If that is

not enough, the EMATUM debt, which

also had become known only after an

unexplained lapse (and that was recently

restructured), was also a disaster from

the point of view of procurement and

management regarding the feasibility of

the project, transparency, and financial

burden for the country.

CIP is concerned that the primary impact

of the suspension of the budget

support, i.e., the negative effect on general

macroeconomic variables, will put

the whole fiscal policy strategy of the

Government under stress as mentioned

in Box 1. Nonetheless, the Government

should avoid any ad hoc reaction,

such as resorting to printing money that

would make matters worse for the Mozambican

people. CIP urges the Government

to avoid any panic reaction and instead

focus on an orderly reprioritization of expenditures

in the light of lower government resources.

In particular, CIP calls on the Government

to undertake a sectorial exercise that canvasses

the individual sectors as to their spending priorities

to allow a structured adjustment of

outlays. Such an exercise should be started immediately

and culminate in the submission of a

supplementary budget by mid-2016.

The crisis of suspended budget support

also has a secondary impact by affecting

project aid from donors. Given that the

level of mistrust of development partners

has risen because of the debt scandal,

it stands to reason that they will also

be more careful henceforth with their

funds for projects. Donors are likely to

want more scrutiny and will want to audit

the use of funds more closely, all of

which is likely to slow down the rhythm

of project implementation (as already

publicly stated by USAID). CIP therefore

urges the Government to take this secondary

impact into account in readjusting the budget,

so as to minimize further damage to the Mozambican

economy.

Since April 3, when the Wall Street

Journal revealed the undignified strategy

of the Government in relation to

the unreported debts, several weeks

8

have passed. Nonetheless, the Government

has not yet presented all the details

to the Mozambican people—nor

interacted with the National Assembly

regarding the explanation and approval

of the transactions, which is another

disaster. Even though in recent days

the National Assembly has scheduled

a session to seek explanations from the

Government, CIP deplores the fact that the

session is only scheduled for June 22, especially

since it is likely to occur only in July, depending

on the Points of Order of the Assembly.

Even though it is justifiable and necessary

to have sent high-level delegations

to Washington--Prime Ministers,

Ex-Prime Ministers, Ministers, Governors--it

is also necessary to organize

high-level meetings inside the country

to inform Mozambicans. CIP urges the

Government to seize the opportunity of the

scheduled meeting with the National Assembly

to disseminate to all citizens the discussions of

the event, in order to meet the democratic obligations

of the Government for the transmission

of transparent information on public finances

to the Mozambican people.


Antoinette Sayeh

Créedito: www.lemonde.fr

Annex 1. Press statements

by imf and government

A. IMF press statement

In a press conference in Washington on Friday, April

15, the Director of the IMF’s African Department,

Antoinette Sayeh, said the IMF received confirmation

last week of the existence of substantial loans

that had not been previously revealed the IMF: “The

undisclosed borrowing exceeds $1 billion and significantly

changes our assessment of Mozambique’s

macroeconomic outlook. We are currently ascertaining,

in cooperation with the authorities, the facts regarding

this borrowing. We have advised the authorities

that any undisclosed debt-related transactions,

irrespective of their purpose, need to be reported

9

transparently and publicly. Such disclosure is essential

to ensure full accountability of the government

to its citizens and Parliament, allow an accurate assessment

of the previously undisclosed debt on the

macroeconomic outlook, and assess the impact of

these possible transactions on the IMF-supported

arrangements with Mozambique. The mission that

was scheduled to initiate discussions next week for

reviews of Mozambique’s arrangements under the

policy support instrument and standby credit facility

has been cancelled, pending a full disclosure and assessment

of the facts.”

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA


Adriano Maleiane

Créedito: www.miramar.co.mz

B. Statement by the Minister of Economy

and Finance, Dr. Adriano Maleiane

(Source: O País, April 19, 2016)

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA

The Minister of Economy and Finance vouched today

[April 15] that there was no hidden debt related to EMA-

TUM. Adriano Maleiane recognizes, however, that there

is a loan with a government guarantee amounting to 622

million dollars.

“There was some confusion that ended up creating a lot

of noise about Mozambique without need. All that has the

government guarantee is safeguarded. We assume all that

has been guaranteed by the Government. This is the tranquility

that I continue to give investors”, Maleiane said.

The Minister of Economy and Finance said the debt currently

known has never been hidden. At issue is a loan

worth 622 million dollars given to Pro-Indicus, with government

guarantee. In other words, besides the EMA-

TUM, the Government guaranteed the debt of another

10

company. Maleiane explained that the debt seemed hidden,

because the banks that lent the money did not report

it to investors.

“What investors did not know is that in 2013 the two

banks that organized the operation lent 622 million dollars

to another company, Pro-Indicus, to finance the purchase

of ships and radar installations to combat piracy ... Unfortunately,

the way the process was managed may have led

to this confusion.”

The Minister regretted that the confusion had affected the

external credibility of the country. “It did affect it--the investor

was left in doubt, uncertainty. Whoever gave the credit

should reassure those investors. Investors just wanted to

make sure that the Government still continues to consider

that debt as a responsibility,” concluded Adriano Maleiane.


Carlos Agostinho do Rosario

Créedito: magazineindependente.com

C. Statement by the Prime Minister of

Mozambique, Carlos Agostinho do Rosario

(Source: O País, April 19, 2016)

11

The Prime Minister travels to the United States to confirm

the total of the debt guaranteed by the State. ... Carlos

Agostinho do Rosário will clarify doubts over the public

debt, particularly loans with state guarantee. The list

includes debt of EMATUM and Pro-Indicus - the latter

known recently through the international press.

According to a statement from the Prime Minister’s office,

“Carlos Agostinho do Rosário will hold separate meetings

with the Managing Director of the International Monetary

Fund, senior World Bank officials and U.S. authorities.”

... The Prime Minister goes to Washington also with

the aim of clarifying the debt issue. “The Prime Minister

will also confirm the total debt incurred by public companies

with government guarantees, which do not appear in

statistics and were not reported to the IMF in the context

of the economic program under way, for reasons that will

be discussed during the aforementioned meetings,” says

the statement of Agostinho Rosario’s Office.

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA


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34

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FICHA TÉCNICA

Parceiros

anos. do Governo, não!

se

ós?

feita Parceiros

nos.

Director: Adriano Nuvunga

eita FICHA TÉCNICA Equipa Técnica do CIP: Anastácio Parceiros Bibiane,

ÉCNICA

Baltazar Fael, Parceiros Borges Nhamire, Celeste Filipe,

Director: Adriano Nuvunga

Edson Cortez, Egídio Rego, Fátima Mimbire, Jorge

Adriano Nuvunga Equipa Técnica do CIP: Anastácio

Matine,

Parceiros

Lázaro

Bibiane,

Mabunda, Stélio Bila;

rge Baltazar Fael, Borges

écnica uvunga do CIP: Anastácio Bibiane, Parceiros Nhamire, Celeste Filipe,

Assistente de Programas: Nélia Nhacume

Edson Cortez, Egídio Rego, Fátima Mimbire, Jorge

ael, Borges Nhamire, Celeste Filipe,

CIP: Anastácio Matine, Bibiane, Lázaro Mabunda, Layout Stélio Bila; & Montagem: Nelton Gemo

rtez, Egídio Rego, Parceiros Fátima Mimbire, Jorge

s stácio Nhamire, Celeste Filipe,

Endereço: Bairro da Coop, Rua B, Número 79,

ázaro Mabunda,

Bibiane, Assistente Stélio Bila; de Programas: Nélia Nhacume

o , Celeste Rego, Fátima Filipe, Partners Mimbire, ParceirosJorge

Maputo - Moçambique

e de Programas: Layout Nélia & Montagem: Nhacume Nelton Gemo

átima unda, Mimbire, Stélio Bila; Jorge

Contactos:

Parceiros

lio Montagem: Endereço: Nelton Gemo Bairro da Coop, Rua B, Número 79,

amas: Bila; Nélia Maputo Nhacume - Moçambique Fax: + 258 21 41 66 25, Tel: + 258 21 41 66 16,

: Bairro da Coop, Rua B, Número 79,

Parceiro

rge lia : Nelton Nhacume Gemo

Cel: (+258) 82 301 6391,

de assuntos

Moçambique

,

Contactos:

de género:

,

Gemo

Parceiro

Coop, Jorge Rua B, Número 79, E-mail: cip@cip.org.mz

s:

Fax: + 258 21 41 66 25, Tel: de assuntos + 258 21 41 66 16,

ua ue B, Número 79,

de Website: género:

Parceiro

http://www.cip.org.mz

8 rge 21 41 66 25, Cel: Tel: (+258) + 82 21 301 41 66391,

16,

de assuntos

Parceiro

de género:

8) 82 301 6391, E-mail: cip@cip.org.mz

de assuntos

25, Tel: + 258 21 41 66 16,

de género:

p@cip.org.mz Website: http://www.cip.org.mz

258 21 41 66 16,

4

Parceiro

6391, 9,

Parceiro de assuntos

ttp://www.cip.org.mz

Editorial Information

de assuntos de género:

.mz

de género:

4

w.cip.org.mz

Parceiro

Director: Adriano Nuvunga

mz 6,

Technical team of CIP: Anastácio Bibiane,

ANTI-CORRUPÇÃO • BOA GOVERNAÇÃO • TRANSPARÊNCIA

de assuntos

Parceiro

de

de

género:

Baltazar Fael, Borges Nhamire, Celeste Filipe,

assuntos Edson Cortez, Egídio Rego, Fátima Mimbire,

Parceiro de género: Jorge Matine, Stélio Bila.

de assuntos Program Assistent: Nélia Nhacume

de género: Ownership: Centro de Integridade Pública

Design and Layout: suaimagem

12

Contact:

Center for Public Integrity (Centro de

Integridade Pública, CIP)

Bairro da Coop, Rua B, Número 79

Maputo - Moçambique

Tel.: +258 21 41 66 25

Cell: +258 82 301 6391

Fax: +258 21 41 66 16

E-mail: cip@cip.org.mz

Website: www.cip.org.mz

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