Mozambique 8 April: The donors’ dilemma
Good afternoon. Can Mozambique avoid stepping into the abyss? That was the question asked this week by Copenhagen University professor Sam Jones this week, who concluded that it will depend in part on keeping foreign donors on-side. But that will be easier said than done.
The EMATUM scandal has already cost the government a number of donors who used to give directly to the state budget. Those who remained did so on the understanding that budget transparency and responsibility would get better, not worse. It has now become plain that the opposite is true. They meet on Monday to decide their next move.
MORE DETAILS: Mozambique donors weigh response to new debt-for-arms scandal
The donors face an unenviable dilemma. Mozambique can ill-afford to lose more budget support, especially in the light of the latest revelations about the extent of its debts. The ProIndicus revelations will alienate the IMF who many felt had been very forgiving over EMATUM. It is unclear if the Fund has yet disbursed all of the $283 million it agreed to lend Mozambique last December, and if not, it is doubtful that it now will.
Donors will be aware that another financial crisis will hit the poorest, hardest - again. As @Verdade pointed out this week, a conservative estimate of the total borrowed by EMATUM and ProIndicus comes to triple the country’s health budget for 2016, and four times the amount destined for spending on agriculture and food security. Meanwhile, 1.5 million Mozambicans are going hungry, and the national disaster management agency is asking foreign aid agencies for $13 million a month to feed them.
The urban poor could yet be hit by another rise in the price of bread, we reported this week, despite the Minster of Trade and Industry telling the press that another increase wasn’t on the cards. Mozambique’s association of bakers, AMOPÃO told us the announcement was premature, as the government hadn’t yet had time to properly review their new pricing proposal.
MORE DETAILS: Mozambique bread price could still rise, warn bakers
If nothing else, the incident shows that the government needs to improve the professionalism of its communications. Today, we revealed that the state pensions and social security fund, the INSS, is seeking to hire a PR agency after a scandal-hit 2016 so far. It will be hoping that the company does a better job than CTA chairman Rogerio Manuel, whose attempts to cover up the INSS scandal in January ended up having the opposite effect.
MORE DETAILS: Mozambique’s scandal-hit pension fund seeks PR firm to clean up its image
Later this month, Maputo’s Joaquim Chissano Conference Centre will play host to the Mozambique Mining, Oil & Gas and Energy conference and exhibition (MMEC), bringing together the key players from Mozambique’s natural resources industries and government.
It’s a difficult time for the sector, as a global commodity price slump has hit the viability of their businesses. This week, Zitamar reported that Mozambique’s only significant bauxite mine is facing difficulties as its main customer is Zambia, whose own economy has been hit hard by falling copper prices.
MORE DETAILS: Zambia’s economic woes hit Mozambique bauxite exports
As for Mozambique, its future seems to lie for now in the hands of foreign donors and the IMF, whose annual meetings start in Washington next week. Can Mozambique be forgiven a second time?
Have a great weekend.