11 April 2018

Mozambique: Assembly Debates 2016 General State Account

Maputo — The Mozambican parliament, the Assembly of the Republic, on Wednesday began debating the General State Account (CGE) for the 2016 financial year - and anyone who regularly attends parliamentary debates will have had a sense of déjà vu.

For the arguments on display were essentially the same as in all previous years for all previous CGEs.

The CGE is drawn up by the government after the end of the financial year concerned, and is then submitted to the Administrative Tribunal, the body responsible for overseeing the legality of public expenditure. The Tribunal then sends its report and comments on the CGE to the Assembly.

The Tribunal always finds mistakes and shortcomings in the CGE. The opposition parties in the Assembly, the rebel movement Renamo and the Mozambique Democratic Movement (MDM), then always say that the Tribunal's report is evidence of government misconduct or corruption, and call for rejection of the CGE.

The ruling Frelimo Party always defends the CGE as showing that the government is carrying out its programme, but accepts that there have been failings. It claims that the CGE is improving, year after year, and that, since the account is in accordance with the law, it should be accepted.

This year was no exception - the Frelimo group on the Assembly's Legal and Constitutional Affairs Commission declared that the CGE shows "an evolution in the government's performance in the transparent execution of the State Budget, while the MDM group protested that the government had ignored recommendations made by the Administrative Tribunal in previous years.

Among the irregularities stressed by the opposition were the failure of the government to explain how the unspent budget surplus had apparently tripled between 2016 and 2017, rising from 16.4 billion meticais to 48.2 billion (from 268 to 790 million US dollars, at current exchange rates).

There were also state bodies that had altered their budgetary allocations without the legally required documents to justify this, or had violated procurement norms. The archives in some departments remained disorganised, making it difficult to locate documents proving revenue collected and expenditure made. Some of the dividends companies paid to the state in 2016 were not registered in the CGE.

Despite an optimistic gloss by several Frelimo deputies, 2016 was indisputably a very bad year for the government of President Filipe Nyusi, who had only taken office in January 2015. The initial forecast for economic growth in 2016 was seven per cent, revised down to 4.5 per cent half way through the year. But the final figure was a growth rate of only 3.8 per cent.

The average 12 monthly inflation rate over the year was 19.9 per cent, against an initial forecast of 5.6 per cent. Exports declined by 1.7 per cent, and imports fell by 36.5 per cent.

Several Frelimo deputies explained this on the grounds that 2016 was "an atypical year", in which the country faced poor climatic conditions, an unfavourable international economic environment, sharp depreciation of the Mozambican currency, and the suspension by donors of direct support to the Mozambican state budget.

But none of the Frelimo deputies mentioned the main cause for the currency devaluation or the end of donor support for the state budget. This was the brute fact that in April 2016 the true size of Mozambique's foreign debt became public knowledge.

The previous government, under President Armando Guebuza, had concealed government guarantees for loans of 1.1 billion US dollars, from the banks Credit Suisse and VTB of Russia, to the security related companies Proindicus and MAM (Mozambique Assets Management). Added to the government guarantee for an 850 million dollar loan to Ematum (Mozambique Tuna Company), which was already known, this brought the illicitly guaranteed loans to over two billion dollars, or about 20 per cent of the total foreign debt.

At this point the International Monetary Fund (IMF) accused the government of concealing the true financial state of the country, and suspended its programme with Mozambique. Other donors and funding agencies followed suit, including the 14 donors who had once provided direct budget support. That funding was frozen indefinitely.

It was then that inflation began to soar, and the metical went into a tailspin - which was only halted towards the end of the year when the Bank of Mozambique imposed tough monetary measures, including a dramatic hike in interest rates.

While Frelimo deputies did not mention the Ematum, Proindicus and MAM loans, one senior Renamo figure, Jose Samo Gudo, made them the centrepiece of his speech. He noted that the British Jubilee Debt Campaign, had declared "The people of Mozambique should not have to pay one cent on these secret debts", and wondered why Frelimo deputies are not taking the same vigorous position.

He criticised the government for negotiating with the creditors in London in March, rather than rejecting responsibility for the illicit loans. "The government should not have gone to London to say that Mozambicans will pay".

Samo Gudo cited the audit, by the company Kroll, which had pointed to apparent over-invoicing to the tune of 700 million dollars for goods acquired by the three companies, and noted that the Ematum fishing fleet "is rotting in Maputo port. What have the Mozambican people got to do with this? We don't want to pay these outrageous debts. Why should an entire people pay for what a handful of wrongdoers stole".

The government will respond to the debate on Thursday.

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