The Mozambican Association of Economists (Amecon) today considered “a lesser evil” the resumption of financial assistance from the International Monetary Fund (IMF) to the country, advocating “caution” because financing from this entity will imply more debt.
The IMF announced last month that it had reached an agreement with Mozambique for the implementation of an Extended Fund Program (EFF) until 2025, disbursing financial aid for the first time since the scandal of the hidden debts.
“The IMF team has reached a technical agreement with the authorities of Mozambique for a three-year program supported by an APP in the amount of US$470 million [428 million euros],” announced the leader of the IMF team in the country, Alvaro Piris.
Speaking to Lusa today, Pedro Cossa, president of Amecon, called the organization’s financing “a lesser evil,” noting that it will involve more debt, but under more favorable conditions than those offered by other creditors.
“I say it’s a lesser evil, but I don’t see any reason for much enthusiasm, even though we will have to resort to the IMF, given the facilities that the IMF offers” in its financing, he declared.
The other advantage, he continued, is the sign of confidence, because the reputation of the institution encourages other partners and investors to believe in Mozambique.
“This signal can also bring that support,” Pedro Cossa noted.
The economist emphasized that the country needs to continue to mobilize internal resources to finance the economy, by broadening the tax base, to reduce vulnerability to the uncertainties of external flows.
“With the closure of external sources of financing, the country has turned to the domestic market and we have seen a growing domestic capital market,” he stressed, noting that recourse to external debt is “inevitable” in the current circumstances of Mozambique’s economy.
The IMF was one of several international partners that suspended financial aid to Mozambique following the disclosure in 2016 of loans from public companies that had not been announced to the parliament or to international donors.
The process, known as the hidden debt scandal, involved several leaders of the executive then led by Armando Guebuza and in which the current President was Minister of Defence, the area in which the public companies that contracted the hidden loans operated.
