Donor thumbs down on Kroll audit tightens the screws

Budget support donors, the World Bank and Japan have all said recently that the Kroll forensic audit of the $2 bn secret debt was insufficient to allow a resumption of direct funding to the government. This suggests the squeeze on government spending will continue for at least another year, which could have an impact on municipal elections in October 2018. The government is already surviving by not paying its bills and through domestic borrowing, and the World Bank in its Mozambique Economic Update issued earlier this month noted that government was recently unable to sell bonds even at an interest rate of 28.3%.

The World Bank has been one of the biggest providers of budget support and in March Bank country representative Mark Lundell said he hoped budget support could be resumed this year. But on 24 July Bank Executive Director Andrew Bvumbe dashed any such hopes. On a visit to Maputo he stressed that budget support could not be resumed without a restructuring of the debt, including the $2 bn secret debt, and agreement on an IMF programme, which in turn requires filling the information gaps left by Kroll. (Savana 28 July, Lusa 25 July)

"The auditors were however denied full cooperation from all institutions (national and international)" noted a report accepted last week by the Group of 14 (G14) budget support donors. "Despite being refused essential information, the summary suggests major misconduct from national and international parties." The G14 demanded "publication of the full report and additional information to fill the major gaps", as well as "accountability" and fiscal and governance reforms. (Savana 28 July) So no budget support soon. 

Japan has cut off all new lending to Mozambique, Yamashita Chigiru, the representative of the Japanese International Cooperation Agency (JICA), told O Pais (20 July) in Tokyo. He said it was necessary not only to clarity the secret debts, but to ensure that such a situation cannot be repeated; until then, "it is not appropriate to give loans to Mozambique."

Although the World Bank continues to approve new projects not involving direct funding of the government budget, Japan has stopped all new lending although it will continue with projects already under way.

In a statement 24 July Minister of Economy and Finance, Adriano Maleiane, accepted that there would be no IMF programme this year, but said there was the possibility of a program in 2018.

 (O Pais 25 July)

Joseph Hanlon