- IMF refused to grant new financing , demanding structural economic reforms
- Contracted firm specialises in restructuring large, bankrupt companies
By MOZTIMES
Maputo (MOZTIMES) – The Ministry of Finance has announced the hiring of the US firm Alvarez & Marsal to advise the Mozambican Government on fiscal reforms following a critical report by the International Monetary Fund (IMF) on the country’s economic situation.
The firm’s appointment was announced in a statement released by the Ministry of Finance late on Wednesday, just 24 hours after the IMF Executive Board concluded that Mozambique “continues to face a complex macroeconomic environment marked by subdued growth, fiscal and debt vulnerabilities, and declining foreign aid”.
The findings are not new. The Executive Board endorsed the conclusions of a mission by the multilateral organisation that conducted an assessment of the Mozambican economy in November last year.
While acknowledging some progress, such as the resumption of the Mozambique LNG (Liquefied Natural Gas) project in the northern province of Cabo Delgado, stable inflation and an increase in net international reserves, the IMF criticised the Government’s fiscal policies and forecast difficult times ahead, with low economic growth of around two per cent per year when extractive projects are excluded.
“Current macroeconomic policy settings—notably large fiscal deficits and the need for greater exchange rate flexibility—are likely to exacerbate macroeconomic and debt vulnerabilities”, the IMF said. “Economic growth outside the mining sector is expected to remain modest, at around two per cent, reflecting weak credit growth. Inflation will likely exceed the central bank’s implicit target over the medium term, driven by monetary financing of large fiscal deficits”.
The IMF expects Mozambique’s economic situation to improve from 2030 onwards, when gas exports from the Mozambique LNG project, led by the French company TotalEnergies, begin to gather momentum. However, this is contingent on there being no further suspension before then, which remains a risk in the context of the continuing insurgency in Cabo Delgado.
Alvarez & Marsal, a firm specialising in restructuring large bankrupt companies, will provide financial advisory services to the Government, including on “proactive reform of the public debt”, and on “structural reforms”, and on ensuring “a new programme supported by the IMF”, according to the statement.
The Government document does not provide details on the cost of the advisory services to be delivered by the US company, nor on the duration of the contract.
Alvarez & Marsal has previously been at the centre of major financial controversies, including in the case related to the collapse of Lehman Brothers, in which the firm now advising the Mozambican Government received nearly 500 million US dollars in fees over the three years following the bank's collapse. (MT)
