Maputo — The European Union has pledged 100 million euros (about 117 million US dollars) in support for the Mozambican state budget for the next two years.
The money is intended for education, health and social welfare, including the activities under way to block the spread of the Covid-19 respiratory disease.
50 million euros of this support will be disbursed this year, and the remaining 50 million euros in 2021.
This agreement was signed in Maputo on Monday by Mozambican Foreign Minister Veronica Macamo and by the EU ambassador to Mozambique, António Sanchez-Benedito Gaspar.
"This is direct budget support based on a strong spirit of partnership, alignment and trust", said Gaspar. "It is specific budget support focused on the consequences of the socio-economic impacts of Covid-19".
He admitted that this is not "direct budget support" in the sense that this form of aid is normally understood, in that it has "very different characteristics" from the aid which the EU channelled to the state budget in the past.
Up until early 2016, a group of 16 donors, including the EU, provided direct budget support to Mozambique, with no strings attached, but under a Memorandum of Understanding. That support came to an abrupt halt in April 2016, when the extent of the Mozambican government's indebtedness became public knowledge.
In violation of the Memorandum of Understanding, of the budget law, and of the Mozambican constitution itself, the government of the then President, Armando Guebuza, illicitly guaranteed loans of over two billion US dollars from the banks Credit Suisse and VTB of Russia to three fraudulent, security-linked companies, Pro-indicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management).
Since the companies were all effectively bankrupt, and had no way of repaying the loans, the Mozambican state became liable, and the illegal loan guarantees added dramatically to the country's foreign debt. When the scale of the scandal became public knowledge, the International Monetary Fund (IMF) suspended its programme with Mozambique, and all the donors providing direct budget support suspended their disbursements.
Gaspar said "We in the European Union continue to believe in the measures, in the efforts that are being made by Mozambique", and regarded Mozambique as a partner in pursuing the UN's Sustainable Development Goals.
He added that the 100 million euro grant will be accompanied by control mechanisms strengthening transparency in the management of public assets.
Turning to the attacks by islamist terrorists in the northern province of Cabo Delgado, Gaspar said the EU is working with the government's Integrated Northern Development Agency (ADIN) to design specific parcels of aid for the struggle against terrorism.
"In the context of security, we are jointly looking at the concrete areas where aid can go to strengthen the country's capacities", he said.
For her part, Veronica Macamo said "we believe our cooperation will be strengthened so as to mitigate the suffering of Mozambicans in Cabo Delgado, which results from the actions of terrorist groups".
She added that the EU's support favours setting up the necessary conditions for speedily improving the health conditions in schools, particularly primary schools.
The EU grant, Macamo added, will also boost protection for households in a situation of vulnerability, as well as continual access to basic health services.