Donors are trying to crack down on corrupt politicians in Mozambique by withholding aid money. Will their approach hold the culprits of corrupt acts and bad governance accountable? Chances are that the ones who will suffer the most are poor Mozambicans.

Mozambique is struggling to meet its obligations to international creditors due to secret loans acquired by the former government. Massive public debt and corruption has left the country reeling.

Donors are now putting pressure on the Mozambican government and have cut budget support.

-Their approach will probably yield results, but there is a painful paradox to the situation. By holding back aid, the donors are effectively punishing the poor population, says Salvador Forquilha, director at the Institute of Social and Economic Studies (IESE), one of CMI’s partners in Mozambique.

The accounts do not add up
In 2013 and 2014, the companies Proindicus, Ematum and Mozambique Asset Management, all  owned by the state or by people with close ties to Mozambique’s Ministry of Defense, the security services and central FRELIMO generals, undertook loans topping USD 2 billion. The companies collapsed, and the debt is now owed by the Mozambican state which is struggling to repay the loans.

There is little information about the debt, and there is little visible proof as to what the money has been spent on, but newspapers have printed pictures of fishing boats allegedly bought by the company Ematum for some of the money. The company claimed that the fishing boats were meant for tuna fishing, but judging from the pictures, the fishing boats do not have the necessary equipment and will have to be reequipped for tuna fishing. The fact that Mozambican waters are not known as good for tuna fishing raises further suspicion. Money also went to the purchase of high-speed defense vessels, supposedly for coastal protection, and to protect gas and oil investments.

-But the figures do not add up, says Salvador Forquilha. 

Donors suspending support
The Mozambican government is now trying to restructure its debt so that it can meet its obligations to the creditors, given its very limited resources. Civil society activists argue that repaying the debt will have a dramatic impact on public spending and hence have devastating consequences for the country’s poverty-struck citizens. They claim that Mozambique should not repay the loans. Salvador Forquilha supports their arguments.

- If the government pays interest and installments on the loan, it implicitly means that the loans were made legally, which is not the case. The loans were made circumventing the law. They should have been up for open discussion in parliament and were not, says Forquilha.

The International Monetary Fund (IMF) and donors have now suspended budget support and some grants. Mozambique has received budget support for many years, and the donor “squeeze” is starting to have an effect on an already strained economy. The government has announced possible cuts in the education and health budgets.

Salvador Forquilha sees the donor approach as a threat to the well-being of poor Mozambicans. Yet, he urges the International Monetary Fund (IMF) and other international donors to not handle the corruption leniently.

-The donors should push for international audits and not settle for the government’s stance that an internal audit is sufficient. We need an independent panel of auditors that can provide clear information and investigate where the money has gone, he says.

Transparent money flows are an important anti-corruption measure, and Forquilha argues that aid in the shape of budget support is especially susceptible to corruption. He suggests that aid instead could be delivered as sector support to projects in health, education and infrastructure.

-Donors could probably have dealt more efficiently with corruption at an earlier stage by redirecting aid from budget to sector support. When you do not have a clear dividing line between the state and the political party in power, you end up supporting the bad guys, he says.