CONFLICT TARGETS MINING SECTOR IN FINANCIALLY TROUBLED MOZAMBIQUE
OVER 2016, MOZAMBIQUE ' S CURRENCY, THE METICAL, LOST
AROUND 40 PERCENT OF ITS VALUE AGAINST
THE DOLLAR
nies, to businesses that provide services to mine workers and those that supply building materials.”
Troubled economy
In addition to its ballooning debt load, Mozambique fell foul of international creditors earlier this year. The IMF suspended its programme in Mozambique in April when it emerged that the country ' s government had hidden loans worth $ 1.4bn from the Washington-based lender while finalising a bailout package.
Prior to the programme ' s suspension the IMF was due to disburse the first $ 117.9m instalment of a $ 283m standby credit facility by December. Talks have since resumed between government officials and the IMF, but the country ' s position remains precarious. By its own rules, the IMF will not be able to intervene until the government takes steps to rectify its debt distress.
Over 2016, Mozambique ' s currency, the metical, lost around 40 percent of its value against the dollar. On September 30, the central bank announced that it had been forced to bail out the country ' s fourth largest lender, Moza Banko. On September 29, the IMF said that it expects growth to be 3.7 percent in 2016, down from 6.6 percent in 2015.
The disruption to Mozambique ' s mining sector is also limiting the country ' s access to foreign currency at a time when it needs to bolster reserves in order to service dollar-denominated debt and fund imports. According to data published by Mozambique ' s central bank, the country had foreign reserves of $ 1.9bn at the end of June – a 26 percent drop year on year and the equivalent to only 3.2 months worth of imports.
Reserves are considered inadequate if they dip below three months, according to a rule of thumb used by economists at the IMF.“ Even if the numbers reported are accurate – Mozambique ' s lack of foreign reserves is worrying,” says Mr McKeon.“ It will be interesting to see what deal, if any, they are able to make to avoid defaulting.”
The outlook for political stability over the coming months is bleak according to both analysts and private sector participants – with recent events casting a shadow over planned negotiations between Mozambique ' s ruling party, Frelimo, and Renamo.
On October 28, officials announced that the latest round of peace talks between the two parties had failed to produce any tangible results. Peace talks were undermined on October 8 when the senior Renamo negotiator Jeremias Pondeca was shot dead whilst jogging on the beach in Mozambique ' s capital, Maputo.
The day before the shooting, Renamo president Afonso Dhlakama rejected a ceasefire proposed by international mediators, saying that the group would lose out if it agreed to stop militant activities.“ Frelimo accepts some things because it is losing on the ground,” he told the Portuguese news agency Lusa, of talks with the ruling party.
“ If we accept a ceasefire now without an agreement with Frelimo, negotiations might take two to four years, because they are in power now and there would no longer be any discomfort for them.”
2016 | Business Times Africa 59