Secret loans: What happens now?

By Joseph Hanlon

Like a naughty schoolboy caught smoking in the bike shed who is then summoned to the school principal's office, Prime Minister Carlos Agostinho do Rosario flew to Washington to appear before IMF Managing Director Christine Lagarde. Apparently he confessed to her that at least $1.35 bn in loans were taken out in secret without telling parliament or donors - or, most importantly, the IMF.

At least $2.2 bn - equivalent to all government spending for five months - has been squandered in secret on boats of dubious necessity and, it is widely assumed, on corrupt payments. So, what happens now?

There are two guiding principles which will shape whatever happens. First, Frelimo is obsessed by maintaining unity at all costs. Ever since Eduardo Mondlane was assassinated in 1969, Frelimo has realised that it can only gain and keep power by not splitting up. That means no one is expelled from the party no matter how corrupt or incompetent they are; anyone who might be a threat is given a sinecure. Disputes are settled within the party and the aim is for win-win agreements. The Ematum bond was said to benefit allies of the former President Armando Guebuza. One of the secret loans just revealed benefitted the military when the current president, Filipe Nyusi, was defence minister. 

The second guiding principle is that the big multinational lenders and donors - the IMF, World Bank and EU - as well as the bigger bilateral donors, need to provide money to Mozambique. Aid officials are mainly judged and promoted based on how much money they dispense. Despite war and scandal, Mozambique is seen as a country they can work with and which largely follows donor policies; Maputo is a pleasant place to work.

The result is a tacit agreement. During the scandals of 1990s when more than $400 mn was stolen from banks, and again with Ematum, the donors and lenders have tried to curb the most egregious excesses. But mostly they only made angry noises. In particular, they have never required Frelimo to publicly identify the culprits - those senior in the party who stole huge amounts and even ordered murders. That, in turn has allowed Frelimo to stay united.

Despite being offended, Christine Lagarde will not cut off Mozambique, because that would look bad for the IMF. Similarly the World Bank and EU will argue they have large development programmes which benefit most Mozambicans, so they should not stop those. A few European donors with conservative governments might take their aid elsewhere, but most will not. The willingness to never name the crooks is because the network of patronage has been skilfully constructed; anyone who is identified will name others. That, in turn, could split the party. Both Frelimo and the donors and lenders fear that a split party could lose the next election, and most donor and lender officials would not want a government run by the present opposition. This, in turn, gives substantial negotiating power to Nyusi, Guebuza, do Rosario and Finance Minister Adriano Maleiane.     Jh

In News reports & clippings
 - 24.04.2016