Mozambique objected to the International Monetary Fund’s (IMF’s) accusation that officials concealed additional loans from Russia VTB Bank and Credit Suisse for defense spending, according to Reuters. The IMF cancelled a trip to Mozambique on Friday in wake of the alleged undeclared loans, but Finance Minister, Adriano Maleiane, stated that the accusation is misguided and stems from confusion. Mozambique borrowed $286 million from the IMF to help the country through a turbulent world economy.
Mozambique has suffered from the low-priced commodities market, and the IMF allegations will add more damage to the southern African country’s reputation while potentially hampering development efforts. The government’s management decisions were called into question in 2012 when officials established a bond program designed to fund a tuna fleet company, but was actually used to pay for the nation’s defense.
Whether the recent IMF allegation holds true, Mozambique has a major public relations problem when it comes to corruption and secretive practices. Furthermore, the prominent wealth gap and lacking opportunities show that the economy is faltering at rapid speed.
The country is rich in such minerals as gold, platinum, and tantalite, and extraction of these minerals added significant growth in recent years. The government has focused on natural resources in the past few decades, with the help of mineral and energy companies.
Mozambique owes a great deal of its wealth to minerals, but such endeavors have not procured widespread wealth for the economy. Though Mozambique holds some of the most precious minerals on the planet, it remains one of poorest nations.
The next frontier lies with natural gas, as officials aim to solidify deals with energy companies in the exploration of offshore reserves. With that, further natural resource exploits have thus far yielded little benefit to the nation as a whole, but it remains to be seen if energy exploration will save the country from ruin.
Like many emerging markets, Mozambique has placed all bets on commodities and energy, failing to invest heavily into other lucrative sectors, such as manufacturing.
The failure to fully develop the economy has led to many citizens struggling with a lack of basic services, such as sanitation and roads, and the situation has grown worse in an economy undergoing contraction, forcing the government to rely on foreign assistance.
Moreover, the drought situation has grown worse, with the government issuing a red alert over the possibility of mass hunger throughout the nation. Policymakers have spent $9.5 million in emergency aid to counter the problem, notes AFP. Mozambique's reliance on foreign aid has declined in the past few years, but it can always count on the world community for humanitarian assistance.
Only time will tell, however, if members of the world community will see Mozambique as a viable and trustworthy business partner.