Good afternoon. President Daniel Chapo has expressed optimism about Mozambique agreeing a new loan programme with the International Monetary Fund (IMF; see below). He met officials from the IMF in Seville yesterday during a United Nations conference. The Mozambican government has sorely missed the IMF’s lending since the last loan programme was abruptly ended in April this year. Not only would the interest-free loans be very welcome to a government struggling to pay its bills, but having an IMF programme in place would encourage other financiers and donors to provide support to the country. It would in particular be a precondition of the European Union resuming the provision of subsidy for the state budget.
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Alexandre Nhampossa
Although the IMF and the government said they had agreed to halt the previous programme, it is fairly clear that it ended because the latter was unable to meet the targets attached to the loan, for example controlling the size of the public sector wage bill.
It is quite possible that a new loan will be agreed before the end of the year, as Chapo hopes. But a new loan will bring with it more targets and old problems. Can the cost of the public sector be reduced, can growing public sector debt be controlled, can tax collection be made more effective and can loss-making state-owned businesses be reformed or privatised? Undoubtedly Chapo and his ministers will want to make a start on tackling these issues now, in order to look as good as possible in front of the IMF executives when the government submits its application (something that, as at May, it had not done).
