Improving Public Debt Management
In the OIC Member Countries
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4.1.2 Republic of Mozambique
A) Public Debt DynamicsWhile the Republic of Mozambique’s general government debt ratio was relatively stable
between 36% and 47% of GDP until 2012, debt has increased steadily after 2012 and currently
equals about 86% of GDP (see Figure 43). One reason among others for the increase was the
depreciation of the Metical (IMF 2016b). Net borrowing increased sharply to 10.7% of GDP in
2013 because of publicly guaranteed bond issued by the stateowned company EMATUM
(AllAfrica 2016). In December 2015, the IMF (2015b) considered Mozambique’s external debt
level indicators to be close to a high risk rating. Mozambique’s debt situation has become even
more critical at the beginning of 2016 when the authorities of Mozambique admitted that an
amount in excess of over $1 billion of external loans of two quasipublic companies granted in
2013 and 2014 had previously not been disclosed to the IMF (IMF 2016a, 2016b). Mozambique
Asset Management (MAM), which is owned by 98% by the government of Mozambique,
received a $535 million loan and Proindicus, a company intended to provide maritime security
services and owned by half by the state, had been granted $622 million (IMF 2016c, IMF
2016a). Considering these contingent liabilities, the public debt level increased compared to
previous estimations.
Following revelation of the undisclosed guarantees, the IMF stopped the disbursement of a $55
million loan and suspended lending, as the country had violated the terms of an agreement
made in December 2015, in which the IMF had granted a $283 million rescue loan package
under the condition that Mozambique fully discloses all borrowings and gives updates on any
recognized changes related to public debt (Wernau 2016). The World Bank stopped any direct
financial aid and held back any budgetary support. All major budget donors, including Sweden,
the European Union, the United Kingdom and the African Development Bank, suspended their
budget support, which amounted to $467 million for 2016 or 12% of total public expenditure
(Wernau and Wirz 2016). Consequently, the IMF revised the debt data for Mozambique in
October 2016: Including the loan guarantees, the debttoGDP ratio increased from 75% of
GDP to 86% of GDP at the end of 2015 (IMF 2016c). Whereas the overall debt risk was
considered to be moderate before the revelations , the IMF considers it to be high after. In June
2016, the IMF visited Mozambique to prevent a further deterioration of the economic
performance and to evaluate the impact of the recently disclosed debt guarantees. The IMF
also discussed measures to increase transparency and strengthen governance and
accountability of the institutions responsible for public debt management (IMF 2016c).