IMF Executive Board Considers Mozambique’s Misreporting Under the Policy Support Instrument and Breach of Obligation Under Article VIII, Section 5
IMF News, November 21, 2016
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Bibliographic details
- Published: November 21, 2016
Overview
- Press Release No. 16/521; November 21, 2016; IMF Communications Department.
- The Executive Board met to consider: a report from the Managing Director on misreporting by the Republic of Mozambique under the Policy Support Instrument (PSI); a breach of obligation under Article VIII, Section 5, of the IMF's Articles of Agreement; and a recommendation to reassess past performance under the PSI.
Key findings and assessments
- Previously undisclosed external borrowing contracted during 2012-2015 amounted to about $1.37 billion (about 10.6 percent of the 2015 GDP).
- The new information revealed non-observance of the continuous assessment criterion on the ceiling for contracting or guaranteeing new non-concessional external borrowing by:
- the central government,
- the Bank of Mozambique,
- selected state-owned enterprises,
under the 2010-2013 and 2013-2016 PSIs.
- The undisclosed debt affected:
- the 6th review of the 2010-2013 PSI,
- the 3rd, 4th, and 5th reviews of the 2013-2016 PSI.
- The Executive Board noted:
- the previously undisclosed debt has played a key role in making Mozambique a heavily indebted country;
- the undisclosed debt has placed the government’s finances and international reserves under considerable strain;
- the undisclosed debt undermined the achievement of key goals under the PSIs, which included accelerating economic development and maintaining macroeconomic stability.
- On the breach of obligation under Article VIII, Section 5:
- The Executive Board found that the Republic of Mozambique breached the obligation to furnish certain information necessary for the Fund to discharge its duties effectively;
- Authorities had reported inaccurate data with respect to the stocks of central government and central government guaranteed debt.
Remedial measures and actions by Mozambican authorities
- Since disclosing the previously unreported debt obligations, authorities have taken several steps:
- In June, the Prime Minister addressed Parliament explaining matters arising from the contracted debt.
- Launch by the Public Prosecutor of a criminal investigation into the debts incurred by certain state-owned entities.
- An independent audit of these entities by an experienced and reputable international auditing company.
- Further corrective actions to introduce reforms to enhance Mozambique’s debt management, reinforce the process of issuing loan guarantees, and improve transparency of public borrowing and guarantees.
Executive Board decisions and guidance
- The Executive Board:
- Took note of the nature and extent of the misreporting.
- Decided it can no longer maintain a positive assessment of program performance under the 2010-2013 and 2013-2016 PSIs due to non-observance of the continuous assessment criterion on the ceiling for contracting or guaranteeing new non-concessional external borrowing.
- Welcomed remedial measures already taken and additional corrective actions committed to by the authorities to improve and strengthen the monitoring and reporting of data provided to the Fund.
- Decided not to require any further remedial action in view of the remedial measures and additional corrective measures, but called on the authorities to implement the announced measures in a comprehensive and timely manner.
- Quoted statement by Mr. Tao Zhang, Deputy Managing Director and Acting Chair:
- “Due to the non-observance of the continuous assessment criterion on the ceiling for the contracting or guaranteeing of new non-concessional external borrowing under the 2010-2013 and 2013-2016 PSIs, the Executive Board decided that it can no longer maintain a positive assessment of program performance under the two PSIs.
- “With respect to Mozambique’s breach of obligation under Article VIII, Section 5 of the IMF's Articles of Agreement, the Executive Board welcomed the remedial measures already taken and additional corrective actions committed to by the authorities to implement measures to improve and strengthen the monitoring and reporting of data provided to the Fund. In view of these remedial measures and additional corrective measures, the Executive Board decided not to require any further remedial action, but called on the authorities to implement the announced measures in a comprehensive and timely manner.
- “The IMF is committed to remaining constructively engaged with Mozambique.”
Key statistics (as reported)
- Previously undisclosed external borrowing: about $1.37 billion.
- Share of 2015 GDP: about 10.6 percent.
- Affected PSI reviews:
- 6th review of the 2010-2013 PSI.
- 3rd, 4th, and 5th reviews of the 2013-2016 PSI.
- Timeframe of undisclosed borrowing: 2012-2015.
IMF Executive Board Considers Mozambique’s Misreporting Under the Policy Support Instrument and Breach of Obligation Under Article VIII, Section 5 — Press Release No. 16/521, November 21, 2016.
Content in this bundle
- Comunicado de Imprensa n.º16//521