WASHINGTON, The International Monetary Fund (IMF) has insisted that the full audit report on the three Mozambican security-related companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) must be published, and it now seems clear that no new IMF programme with Mozambique can be discussed before that happens.

At a press briefing, William Murray from the IMF communications department praised the fact that the audit, undertaken by the London branch of the forensic auditing company Kroll Associates, had taken place and that the Mozambican Attorney-General’s Office (PGR) had released the executive summary of the audit report in June.

Transparency and good governance are key conditions for sustainable, inclusive growth, and that applies to all countries, said Murray. Now we look forward to the publication of the entire audit report in due course. At that point, we will be able to provide an informed view on the audit and its implications.

The initial timetable was that the full report would be released about three months after the summary. Murray made it very clear that only then will the IMF take a full position on the audit and the steps that should be taken to follow it up.

Thus any expectations in Maputo that the mere publication of the summary would be enough to normalise relations with the IMF have been dashed.

The IMF suspended its programme with Mozambique in April 2016, when the full scale of the hidden loans (from the European banks Credit Suisse and VTB of Russia) became apparent. While the 850 million dollar loan to Ematum was already in the public domain, since it took the form of a bond issue on the European market, the loans to Proindicus (622 million dollars) and to MAM (535 million) were kept entirely secret.

All three loans had been illicitly guaranteed by the previous government, under President Armando Guebuza. The over two billion dollars lent to the three companies thus became part of Mozambique’s foreign debt, and pushed it beyond the limits of sustainability.

All other major western partners followed the IMF’s lead and suspended financial aid to Mozambique. In particular, the 14 donors that used to provide direct support to the Mozambican state budget suspended their disbursements. A basic condition for restoring normal relations was an independent audit of Ematum, Proindicus and MAM � hence the hiring of Kroll.

But the audit is incomplete, because the companies refused to cooperate fully with the auditors. Kroll said the companies only provided limited financial data, including incomplete trial balances and bank statements for certain periods, and incomplete supporting documentation, such as loan facility agreements and supplier contracts. As a result, it became apparent that a significant amount of the information originally envisaged to be held by the Mozambique Companies in Mozambique was not available.

As a result there is still no full explanation for what happened to the two billion dollars. Kroll looked at the assets that had been purchased, and compared the value stated on invoices, with an independent valuation � and found a discrepancy of 713 million US dollars.

In addition, 500 million dollars of the Ematum loan, supposedly used to purchase military equipment could not be accounted for, and the contractor for the three companies, the Lebanese firm Privinvest, categorically denied ever supplying military hardware.

Ematum, Proindicus and MAM have the same chairperson, Antonio do Rosario, a senior officer in the State Intelligence and Security Service (SISE). In a message that was widely circulated on social media, Rosario boasted that he had expelled the Kroll auditor from his office.

Asked whether the IMF wanted to track down all the money so far unaccounted before resuming normal relations with Mozambique, Murray replied one of our main conditions is that we want to see full publication of this audit report for transparency. And as it stands right now, the report has only been partially published.

The report provides useful information on how the loans were contracted and on the assets purchased by the companies, he added. However, there are information gaps, in particular on the use of the loan proceeds. We want to see those information gaps closed.

Murray’s press briefing followed a visit to Mozambique by an IMF mission headed, like other recent missions, by Michel Lazare. His final statement from the mission also pointed to the gaps in the audit report. He demanded that the government take steps to fill the information gaps and to enhance its action plan to strengthen transparency, improve governance, and ensure accountability.’

Lazare also said the mission would not result in any discussion at the IMF board � in other words, there will be no new IMF programme for Mozambique in the near future.

Perhaps sensing that the IMF is now in a strong position, Lazare demanded a whole string of austerity measures. He wanted the 2018 budget to concentrate on reducing the fiscal deficit, notably by eliminating tax exemptions and containing the expansion of the wages bill.

In other words, the IMF is demanding that state employees pay for the crisis. Last year’s sharp inflation had already reduced real wages, and the increase in state wages announced earlier this year cam nowhere near compensating for this. Lazare assumed that the impact of austerity measures on poor households could be cushioned by protecting critical social programs and reinforcing the social safety net.

Lazare also wanted only the most critical public investments to go ahead, while attempts should be made to strengthen the financial position of loss-making companies and limit the fiscal risks they represent. He did not name those companies, but they clearly include Mozambique Airlines (LAM), and the state fuel company, Petromoc.