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COMMENT: Bite the bullet or muddle through? A mid-term outlook for Mozambique – by Roberto Tibana

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Roberto Tibana. Photo © Analitica-RJT

Roberto Tibana. Photo © Analitica-RJT

To understand Mozambique’s trajectory over the next four years, one must look further than the financial crisis triggered by the revelation of the secret foreign debts. The debt crisis is in fact just one of a set of complex and intertwined dimensions of a wider and deeper economic, social, political, and military crisis that had been simmering for at least the last ten years.

Looking at these issues led me, in June last year, to develop my matrix of Mozambique scenarios 2016-2020. It was framed in five dimensions:

  1. Fiscal adjustment and debt restructuring
  2. Accountability for secret and illegal indebtedness
  3. Institutional reforms
  4. The resolution of the military conflict between the Frelimo government and Renamo
  5. Economic reforms

For each of these dimensions, I characterised the government’s – and donors’ – options in terms of three scenarios: “dig in your heels”, “muddle through”, and “bite the bullet”. In the months following the debt revelations, the situation was so messy no-one had a clear view on what line the government and donors would take. Now, fifteen months on, I revisit the scenarios and ask myself how things are shaping up.

Biting the bullet would have required slashing the fiscal deficit, through both revenue and spending measures; closing loopholes through which the Frelimo nomenclature and its foreign partners escape paying taxes and finance the ruling political party; and making substantial targeted spending cuts, mostly to the public wage bill and to the subsidies that prop up loss-making state owned enterprises.

The government would have needed to establish new institutions of fiscal responsibility and accountability – fiscal rules, procedures, sanctions – and oversight bodies, such as an independent fiscal council, to create a transparent framework for robust fiscal management, and in particular the management of natural resource wealth.

Biting the bullet would have also required recognising the illegality of the secret debts and co-operating fully with an independent and transparent international forensic audit – followed by prosecution where warranted, and steps to recover diverted assets.

Yes, we had an international forensic audit – but a secretive and half-hearted one, where the securocrats who masterminded the debt plot held the upper hand and fought to frustrate it by all means (certainly under the guidance and blessing of their political masters). The terms of reference remain secret, and only a redacted version has been made public. So to me the audit looks more like the “Open-ended official investigation” that I outlined under the “muddle through” scenario.

Aside from the audit, what we have seen is a Frelimo government dithering between “digging in its heels and “muddling through”. No fiscal adjustment (though the IMF is still calling for it); default (the government stopped servicing the debts of the three rogue companies); issuing domestic debt to offset the loss of foreign financing (see my blog on the Mozambique Fiscal Quagmire); running arrears (ask any government supplier); symbolic and in-kind support from “friends” such as China, Angola, North Korea; and continuing to borrow abroad from or through “rogue” lenders. No one currently knows how the government is securing the foreign borrowing that is happening.

On the political and military dimension, biting the bullet would have required the government to transform its bilateral negotiations with Renamo into an inclusive national political dialogue to address reconciliation, peace, and new rules of the game – constitutional, economic, electoral and administrative reforms – in the form of a National Conference.

Instead, Frelimo and Renamo – with the blessing of some foreign “partners” that could have done better – have colluded to deny the country the opportunity to emerge from this crisis stronger on foundations of national unity, inclusiveness, fairness and justice. But to me this sounds more like a death knell for Renamo and a no less dangerous bet for Frelimo.

If Mozambique’s bipolar political situation continues as it is, there remains a risk of Frelimo’s hard line copying Angola’s ‘Savimbi Solution’ – that is, killing the charismatic opposition leader. For now, Frelimo seems happy to confine Dlhakama to the Gorongosa mountains, removing him from the pre-election phase until the last minute. Then he will come out, lose the elections again (or be cheated out of them, thanks to Renamo’s inevitable lack of organization), and then Frelimo hardliners can finish him off physically once he restarts his cycle of violent protests. Then the truly unknown would follow!

What is certain is that the Frelimo Government has yet to bite the bullet – and there is no certainty that it will ever do so.

Educated at Oxford University, with a D Phil from St Anthony’s College, Dr Roberto Tibana has spent his career advising African governments and multilateral agencies on fiscal policy and economic forecasting. Now resident again in Maputo, he runs his own economic consultancy, Analitica-RJT.

© 2017, Zitamar Ltd. Reproduction and dissemination prohibited without written permission.

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