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IMF Calls for More Transparency in Appointing Boards of State-Owned Companies

IMF Calls for More Transparency in Appointing Boards of State-Owned Companies

The International Monetary Fund (IMF) has recommended that the government use merit and professionalism to appoint members of the boards of directors of state-owned companies, emphasising the need to increase the transparency of public tenders.

The financial institution has made it known that it is keeping a close eye on the 21 state-owned and state-invested companies, whose expenses, debts and financial obligations represent 46 per cent of all the country’s wealth by 2022.

“The process of appointing board members must be formalised and carried out on the basis of competitive merit and transparent principles, seeking professionalism and relevant skills. It is important to ensure that members of state-owned companies do not take up other positions in regulatory or supervisory bodies, and to declare their participation,’ he said.

Although these companies are obliged to follow public procurement regulations, they are still allowed to draw up internal procurement policies, which, in the IMF’s view, carries a number of corruption risks.

Recently, the Executive revealed that the total direct debt stock of public companies in the first quarter of 2024 fell by 1.6 per cent compared to the fourth quarter of 2023, from 39 billion meticals to 38.4 billion meticals (from 612.4 million dollars to 603 million dollars at the current exchange rate).

The Ministry of Economy and Finance (MEF) said that this performance was essentially due to the 3.34 per cent reduction in the stock of direct domestic debt, largely due to the fulfilment of debt servicing, as well as the adoption of the measure to contract new financing only when it is essential and duly substantiated.

“The stock of direct domestic debt of state companies totalled 20.9 billion meticals, representing a reduction of 722.3 million meticals (3.34%) compared to the fourth quarter of 2023. This variation is the result of the contraction in the debt stock of both subsidiary companies by 559.18 million meticals (5.89%) and public companies by 163 million meticals (1.34%) compared to the previous quarter,’ he said.

At the beginning of the month, the International Monetary Fund guaranteed that it would immediately disburse another 60 million dollars (3.7 billion meticals) in support to Mozambique, under the country’s assistance programme.

‘The executive board concluded the regular consultation process with Mozambique for 2024 and the fourth review of the Extended Credit Facility (ECF) agreement 36 months ago, allowing for an immediate disbursement equivalent to 60.03 million dollars usable for budget support, bringing total disbursements to the country to 330.1 million dollars,’ the institution said in a statement.

According to the financial organisation, the three-year ECF agreement aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while promoting higher and more inclusive growth through structural reforms.

The deputy managing director of the International Monetary Fund, Bo Li, recognised that the Mozambican authorities’ efforts to ensure fiscal discipline are welcome.

“Further fiscal consolidation is necessary, given the country’s high debt and tight financing conditions. In this sense, revenue mobilisation and the rationalisation of expenditure on the wage bill are essential to create fiscal space for high-priority social and development spending. Improving the execution of social spending and avoiding future arrears remains fundamental,’ he said.

This programme was approved in May 2022 and provides total funding of 456 million dollars to Mozambique.

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