Mozambique 22 April: Ready for a fresh start?
Good afternoon. This afternoon Zitamar News revealed the existence of yet more secret borrowing by the Mozambican government. The revelations were made this week to the IMF by the delegation led by the Prime Minister, which, we understand, has gone a long way towards repairing relations with the Fund. But they’re not there yet.
SEE: Mozambique’s ‘remarkable transparency’ uncovers yet more hidden loans
President Filipe Nyusi reiterated in Brussels yesterday that repairing relations with the Fund is a priority – something he signalled by sending the PM to Washington. In Brussels, an EU spokesman told Zitamar that no decision had yet been taken on freezing aid to Mozambique. While the IMF requires financial transparency before it lends to countries, donors like the EU will also want to see improvements in governance and accountability before they decide to continue contributing.
SEE: Mozambique PM appeals for calm as Nyusi says IMF spat “must be resolved”
Some will complain about the amount of leverage donors and the IMF now have over Mozambique. However, it’s hard not to conclude that, for now at least, the IMF is working squarely in the interests of the Mozambican people in forcing the government to come clean. Mozambique is arguably fortunate that this scandal was exposed before the country becomes self-reliant through the tax revenues and royalties of a couple of big oil and gas companies – who will have no incentive to make the same transparency requirements of whoever is then in the Ponta Vermelha.
Once everything is out in the open, Mozambique’s finance ministry – with, perhaps, the help of the IMF – will have to decide how it is going to service all of this lending. Nyusi said yesterday in Brussels that he’d like to restructure it as has been done with EMATUM, but it might not be that easy. The Wall Street Journal is today reporting that the investors who agreed to the EMATUM restructure are already considering a legal challenge in the light of the new revelations.
Yesterday, the central bank – whose governor is now feeling the heat after denying knowledge of ProIndicus et al – announced it had helped the government make the last $200 million repayment on the old EMATUM bonds in March, by dipping into its reserves. From June, it will require banks to keep more of their dollars at the central bank – a move which looks intended to ensure it has enough dollars to make future repayments, especially if more IMF funds do not materialise.
SEE: Bank of Mozambique moves for dollar deposits as analysts warn default is ‘likely’
And finally this week, Vale announced its production results for the first quarter of 2016, showing that production fell 25% compared to Q4 2015. The reason, it says, is that it was focusing on moving more than seven million tonnes of waste material to make way for a new coal handling facility due to come online next month.
SEE: Vale Mozambique coal production falls 25%
Clearing out the trash to make a fresh start? Sounds like a plan.
Have a great weekend.