REVELATIONS that the government of
Armando Guebuza took on more than $2
billion in debt in secret are creating a deepening
economic crisis.
The Group of 14 (G14) budget support donors
have all suspended their contributions to the
government budget, the President of Portugal,
Marcelo Rebelo de Sousa has confirmed.
Portugal holds the rotating chair of the G14
and Marcelo Rebelo was on a visit to Maputo.
The IMF had already announced that it would
not release any more funds from the agreed
standby credit. The G14 is already down
from an earlier 19 budget support donors and
Economic and Finance Minister Adriano
Maleiane yesterday announced the first
spending cuts. These include a hiring freeze
and limits to government travel. But he
guaranteed that health and education would
not be sacrificed.
Maleiane said that donor budget support
was $467m per year, corresponding to 12% of
the state budget. Spending cuts will clearly be
much more severe.
The IMF issued a general warning last
Tuesday in its Africa “Regional Economic
Outlook” that African countries, including
Mozambique, that have been forced to turn
to the IMF for support will need to cut their
budget deficits. And Roger Nord, deputy
director of the IMF Africa Department, told
Bloomberg that it is still not clear how large
are the Mozambican secret debts. This will fuel
rumours that more debts are still to be revealed.
There are at least three loans to parastatal
companies taken in secret in 2013. They are
the Mozambique Tuna Company (EMATUM
$850m), revealed last year and recently
renegotiated, and two newly revealed loans,
Proindicus to provide maritime security,
particularly for offshore oil and gas operations
($622m), and Mozambique Asset Management
(MAM), set up for maritime repair and
maintenance ($535m).
At a press conference Thursday 28 April
Finance Minister Adriano Maleiane said that
the Proindicus loan is to be repaid in the next
5 years at an interest rate of 3.75% with the first
payment of $24 mn due in May. Over the 5
year period, the repayments will be running at
an average of $119 mn per year. For the MAM
loan, the repayment period is 4 years at an
interest rate of 7.7%, and the first payment of
$124m is also due in May.
Thus payments of $148 mn are due this
month. An estimated $321 mn in debt
repayments will be due next year (2017) on the
secret loans – Proindicus $119 mn/year, MAM
$124 mn/y and Ematum $78 mn/y. This comes
on top of servicing the government’s remaining
In addition the government has admitted
previously unannounced loans to the Ministry
of Interior. These appear to be suppliers credits
for $221 mn taken between 2009 and 2014.
No further details have been provided, but
the items imported appear to include new
armoured cars for riot control and equipment
for the riot police, who have been doing most
of the fighting against Renamo.
This huge increase in spending at a time of
cuts to IMF and donor funds creates a serious
financial hole for the government.
The Attorney-General’s Office in a press
statement Friday 30 April said that investigations
into the Proindicus and MAM loans were ordered
on 20 April, and that investigations into the
Ematum loan were launched in August 2015..
Is the debt sustainable?
Mozambique’s total public debt stood at
$11.64bn as of 31 December 2015, Prime Minister
Carlos Agostinho do Rosario told a Maputo press
conference Thursday 28 April. Foreign debt was
$9.89 bn. Confirmed domestic debt was $1.75 bn,
while a sum of $233 mn was still being reconciled.
Fitch, the third largest credit rating agency,
has downgraded Mozambique from B to CCC.
It says the debt to GDP ratio is already 83% and
with expected continued devaluation it is likely
to exceed 100% this year – “the highest figure in
15 years and compared with only 37.8% in 2011”.
The Mozambican Debt Group (GMD) points
out that the government’s own figure for total
public debt, of $11.64 bn, means that the debt now
stands at 69% of GDP. The foreign debt is 53%
of GDP. GMD is a civil society organization that
has been working on debt issues for many years,
and says the limit of sustainability is normally
regarded as 40%, and Mozambique’s debt is
substantially over that.
Zitamar notes that ENH, the state hydrocarbons
company, has to raise its share of the multi-billion
dollar investment in the liquefied natural gas
(LNG) production facilities in Cabo Delgado,
which might be difficult with falling credit ratings.
But in an interview ENH chair Omar Mitha says
that investors will treat this as a standalone project
and bonds will be repaid from revenues from
ENH’s share of the gas. He further argues that the
project is viable even at today’s gas prices, but that
he expects oil prices to double to $60-70 per barrel
in five years when the project comes on line.
Mitha’s position is supported by an interview
in the Financial Times with LNG entrepreneur
Charif Souki, who argues that although there is an
oversupply of LNG at the moment, exports from
some producers such as Algeria are declining,
and there will be a shortage by 2021-22 – which
is just when Mozambique’s gas will come on line.
Taking over $2bn in secret government debt
without parliamentary agreement violates various
Mozambican laws, and has caused a substantial
outcry. Although President Filipe Nyusi, as
Defence Minister in the previous government,
must have known about the loans, it is becoming
clear that many in the new government, including
the Prime Minister and Finance Minister, were not
initially told about the secret loans.
Prime Minister Carlos Agostinho do Rosario
said that the transition from one government to
the next “meant that we became aware and had
gradual contact with the dossiers on these debts,
as we dug deeper”.
There were threats of demonstrations on Friday
and a huge police presence in Maputo, including
new armoured cars – leading to the local comment
that this was part of a new transparency, showing
the people what the secret money had been spent
on. In the event, despite social media messages,
there were no demonstrations. But government
offices were closed, giving many people an
unexpected four day weekend (Monday was
May Day holiday).
President Nyusi has been trying to play down
the seriousness of the crisis. He told journalists
last week, “I believe the no donor is interested
in sacrificing Mozambicans.” Nyusi said the
problems is not the debt itself, which he claims
is sustainable, but the “incorrect way it was
contracted.” But he admitted it was necessary
to “disinfect the house” in order to regain the
confidence of donors.
But Teodato Hunguana, a former Constitutional
Council judge and still influential in Frelimo,
accused the government of violating the
Constitution. Taking this debt in secret implies
that “we have two constitutions: one that was
adopted by the Parliament and the other we
do not know, that is not public.” (Lusa 4 May)
Former security minister Sergio Vieira calls the
loans “a crime against the country”.
Political power
The secret loans and other recent reports
raise questions about where power rests in the
Mozambican government.
Finance Minister Adriano Maleiane confirmed
last week the Ematum and Proindicus are both
owned one-third each by the Institute for the
Management of State Holdings (IGEPE), the
public fishing company Emopesca, and the State
Intelligence and Security Agency (SISE). MAM is
owned 98% by SISE and 1% each by IGEPE and
In practice, SISE is controlled by the presidency
and not by the ministries of defence or interior.
And it is notable that huge military investments for
coastal patrols are under SISE and not the navy.
Meanwhile it has been revealed that in 2012-
4, after the 2010 riots, the government set up a
monitoring centre to intercept mobile telephone,
SMS and internet traffic. The equipment was
bought for $140 mn from the Chinese ZTE
Corporation. But the purchase was done
through Msumbiji Investment Limited, where
the son of the former president, Mussumbuluku
Guebuza, is Chief Executive Officer (CEO). And
the monitoring centre is under Casa Militar, the
presidential guard.
A law passed by parliament on 16 March this
year legalises this interception. The equipment
also contains the ability to deal with encrypted
communication, and to locate specific mobile
In Mozambique the military has always been
weak, in part to prevent a military coup. Under
Guebuza, the power of the military was further
weakened. The war against Renamo is largely
being fought by the riot police under the Interior
Ministry. The power of security services under
SISE and Casa Militar has been increased. Has
President Nyusi gained control over interior
and security, or are Guebuza-allied forces still
dominant there?
. Courtesy: African Confidential