Will the Government continue to avoid fiscal transparency

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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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