Mozambique: Future of District Fund Not Yet Decided

The Mozambican government has not yet considered whether, as part of the current cost-cutting measures, it should reduce or eliminate the District Development Fund (FDD).

Speaking to reporters in the district of Chifunde on Saturday, at the end of a working visit to the western province of Tete, President Filipe Nyusi said caution should be exercised in deciding which areas of expenditure should be cut, and which should continue to receive support from the central state budget.

The government faces a major financial crisis, in the wake of the scandal of over a billion dollars worth of government-guaranteed loans, contracted in 2013-14, which had not been disclosed either to the Mozambican public or to the country’s international partners. As a result the International Monetary Fund (IMF) suspended the second installment of a 282 million dollar loan from its Standby Credit Facility (SCF), and the group of 14 donors and financial agencies that provide support directly to the state budget suspended all further disbursements.

“We are taking measures to restrict spending”, said Nyusi, “but we must take care that this restriction does not compromise production”.

The FDD began in 2006 as an allocation of seven million meticais (about 121,000 US dollars at current exchange rates, but worth much more a decade ago) from the state budget to each of the country’s districts. The money was to be lent to people with feasible projects that could create jobs and boost food production.

Despite the failure by the great majority of beneficiaries to repay the loans, the government is reluctant to end the scheme, believing that it has proved of great benefit to the rural economy, particularly by generating employment.

“We haven’t yet discussed this fund as a problem”, said Nyusi. “What we are doing now is making an effort to ensure that the country finances its productive activities”. Thus no decision had yet been taken on the future of the FDD.

Nyusi said that, during his tour of Tete, the main message he had received from the public was a cry for peace against the armed attacks waged by gunmen of the rebel movement Renamo.

The audiences at his rallies, he said, “”do not understand how anyone can claim power by killing people”. The government had repeatedly expressed its willingness to engage in dialogue “but people are still being killed”.

As for the thousands of Mozambicans in the border regions who have fled from Tete into Malawi, Nyusi told the press conference that the government is trying to ensure the best possible life for these citizens, and as a result a significant number had now returned from Malawi.

“But the great problem lies in the mentor of the displacement of these Mozambicans into Malawi”, added Nyusi, clearly referring to Renamo. If Renamo stopped shooting “all of them will return or will stay in their zones of origin producing”.

As for the crisis in the Tete coal mining industry, with several companies ceasing to mine, and merely processing the coal they have already stockpiled, Nyusi said that, even if the coal price has dropped so low that it cannot be exported at a profit, there are still projects on the drawing board to use the coal to generate electricity within Mozambique.

“We should not reach a phase were the country loses from mining coal”, he stressed. Instead of mining at a loss, the coal could simply be left in the ground to be exploited at some future date.

Source: Agencia de Informacao de Mocambique