IMF MISSION OPTIMISTIC

The International Monetary Fund (IMF) has given an upbeat assessment of the Mozambican economy, at the end of a two week visit to the country by an IMF team, led by Ricardo Velloso. In an end-of-mission press release, dated Wednesday, Velloso claimed that the Mozambican economy “is recovering gradually”, with rapidly falling inflation, a stable exchange rate of the Mozambican currency, the metical, and the rebuilding of the country’s international reserves “to a comfortable level” (enough to cover 6.3 months worth of imports of goods and services).

“The outlook for 2019 is for a further, gradual recovery in economic activity and continued subdued inflation”, said Velloso’s release. “Real GDP growth is projected in the range of four per cent to 4.7 per cent, supported by sustained efforts to achieve durable peace, gradual easing of monetary conditions, clearing of domestic payments arrears to suppliers, and higher foreign direct investment, particularly in the liquefied natural gas (LNG) megaprojects. Inflation is projected at around six percent in 2019”.Velloso said his mission “welcomed the Government’s strong commitment to buttress macro-economic stability through fiscal consolidation, tight monetary and financial policies, and the adoption of reforms to improve the business environment as well as governance and transparency”.Velloso said the IMF had advised the government “to maintain fiscal prudence in the run-up to next year’s elections by keeping the primary fiscal deficit at, or below, 1.5 percent of GDP in 2019 (the same level projected for 2018)”. Any foreign financing should be in the form of grants and “highly concessional loans”.

“The mission noted that there is room for the Bank of Mozambique to continue easing monetary policy”, added the release, “but stressed that this should be done cautiously given the uncertainties in the world economy. It encouraged the Bank of Mozambique to safeguard international reserves and maintain the flexible exchange rate regime”.The scandal of the “hidden debts”, of over two billion dollars, contracted in 2013 and 2014 with illegal guarantees from the previous government, headed by President Armando Guebuza, has clearly dropped way down the list of the IMF’s priorities.The mission merely “welcomed ongoing efforts by the Attorney-General’s Office (PGR), in cooperation with development partners, to bring accountability to the issue of the previously undisclosed debts, and encouraged all parties involved to continue these efforts”.In reality, the PGR’s investigations, begun in 2015, have stalled, and there is no sign that any of those responsible for the illegal debts will ever face trial. The IMF is no longer even demanding that the independent audit of the three security-releated companies (Ematum, Proindicus and MAM) that supposedly benefitted from the illicit loans be completed.Refusal by the management of the companies to cooperate meant that the auditors could not estabish how all the two billion dollars had been used.As for the goverment’s plans to restructure the Ematum, Proindicus and MAM debts, the IMF mission merely stressed “the importance of ensuring that possible future agreements with holders of previously undisclosed debts are consistent with returning the country’s overall debt position to a sustainable path and achieving poverty reduction and sustainable development in Mozambique”.