Mozambican Government committed to winning back trust

President Filipe Nyusi declared on 27 January in Maputo that his government remains committed to winning back the trust of international financial institutions and of the country’s other cooperation partners. Speaking at the inauguration of the new headquarters of the country’s second largest retail bank, the BCI (Commercial and Investment Bank), President Nyusi said that an independent international audit of the quasi-public companies Ematum (Mozambique Tuna Company), MAM (Mozambique Asset Management) and Proindicus is going ahead “at a good pace”.

Mozambique’s current financial plight is to a large extent due to the loans, amounting to over two billion dollars, which these three companies took from European banks (mostly Credit Suisse and VTB of Russia) in 2013 and 2014. The loans were all guaranteed by the Mozambican government, but the guarantees are considered by many to be illegal and invalid because they broke the ceiling on guarantees laid down by the budget law, and because such government-guaranteed debt must be approved by the country’s parliament, the Assembly of the Republic, which was kept in the dark.

When the full extent of the loans became clear in April 2016, the International Monetary fund (IMF), and other western partners suspended all financial aid.

The basic condition laid down by the IMF for the restoration of normal relations is a full audit of Ematum, Proindicus and MAM, to see what happened to the two billion dollars. No full list of the assets and services purchased with this money has been published. The US company Kroll has been hired and given until the end of February to produce its report.

“The international audit is going ahead at a good pace”, said President Nyusi. “Our government is taking initiatives seeking to re-establish relations with international financial bodies and with our bilateral partners”. At the same time, the Bank of Mozambique has been urged to implement daring measures “to strengthen the stability of the financial sector”.

The various shocks the Mozambican economy had faced in 2016 “explain the lower GDP growth we experienced last year”, said the President, “associated with the higher depreciation of the metical (the Mozambican currency) in the various segments of the exchange market in the first six months of the year”.

The government had reacted with measures such as “restrictions on public expenditure and greater rigour in budgetary execution”. President Nyusi believed that tight monetary policy had helped lay the base “for a noteworthy stabilization of macro-economic indicators”.

The metical had stabilized in the last few months of 2016. From a low point of around 80 meticais to the US dollar, it has recovered to around 70 to the dollar. The year ended with inflation at 25 per cent, the highest rate for more than two decades, but the president was optimistic that inflation will be much lower in 2017.

The country’s net foreign reserves were eroding in the first eight months of 2016, but as from September they too began to recover, and in the last quarter of the year increased by US$275 million. They are now sufficient to cover three and a half months of imports of goods and non-factor services.

The BCI celebrated its 20th anniversary in 2016, and claims to be the market leader in deposits, credit, business volume and assets. It has over 1.46 million clients, and 196 branches. Its main shareholders are Portuguese banks, CGD and BPI, which hold 81 per cent of the shares.