Donors tell Mozambique to preserve peace like 'treasure'

MAPUTO Thu Nov 14, 2013 1:52pm EST

A child clasps a Mozambique flag in a suburb on the outskirt of the capital Maputo in this file picture taken November 2009. REUTERS/Mike Hutchings/Files

A child clasps a Mozambique flag in a suburb on the outskirt of the capital Maputo in this file picture taken November 2009.

Credit: Reuters/Mike Hutchings/Files

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MAPUTO (Reuters) - Foreign donors urged Mozambique on Thursday to preserve peace like "a treasure" after an increase in political violence, and they questioned a government-guaranteed $850 million debut bond issue that has raised concerns over financial transparency.

Since April, Renamo opposition guerrillas have staged sporadic attacks and clashed with government forces mostly in the center of the southern African nation, following two decades of peace after a devastating 1975-1992 civil war.

The threat of fresh conflict, along with a spate of kidnappings in Maputo and other cities, has alarmed donors and investors in Mozambique who are developing some of the world's largest untapped reserves of coal and gas.

The IMF sees Mozambique's economic growth accelerating to 8.3 percent next year from 7 percent this year, boosted by increased business including operations by mining and energy companies like Brazil's Vale, Rio Tinto, U.S. oil company Anadarko and Italian group Eni.

But there are fears the multi-billion dollar resource investment boom in what is still one of the world's poorest states could be derailed by attacks by Renamo, the main opposition party and former rebel group which accuses President Armando Guebuza of monopolizing economic and political power.

Renamo, whose leader Afonso Dhlakama is on the run from the army in the bush, is boycotting municipal elections next week.

Speaking on behalf of foreign donors after meeting with the government, Italy's ambassador Roberto Vellano said the talks focused on management of public finances, ways of improving the business climate and applying anti-corruption laws.

Vellano said Mozambique was "living a political moment that requires more than ever the gifts of dialogue and defending the peace which have characterized its recent history".

He called this peace "a treasure to be preserved" which he said was essential for economic growth and fighting poverty.

REQUEST FOR TRANSPARENCY

The ambassador said donor governments in the so-called G19 donors' group, which include Britain and other European states, wanted Mozambique to provide more information on the recent bond issue by EMATUM, a new state company which is buying French-built tuna fishing boats and coastal patrol vessels.

The issue totaling $850 million has puzzled some investors and analysts, who have questioned the destination of the funds and asked why the money was not going towards more conventional projects in road, power or transport sectors.

"We recognize that Mozambique needs coastal protection, but for the donors who are providing budget support who see their core business as fighting poverty, this doesn't quite seem to be going in that direction," one donor country diplomat, who asked not to be named, said.

The Mozambican state effectively controls more than 86 percent of EMATUM, created in August this year, through stakes held by state entities that include an investment company, GIPS, controlled by the Mozambican intelligence services.

Last month, an International Monetary Fund team visited the country and its report said Mozambique should make sure that the new tuna company's non-commercial activities are reflected in the government's budget and accounts next year.

Vellano said more information from the government would help respond to donors' concerns over the financial operation "in a spirit of openness and transparency".

Responding to journalists' questions after the meeting with the donors, Planning and Development Minister Aiuba Cuereneia said his ministry was working with the finance ministry to include EMATUM's non-commercial spending activities in the 2014 budget. But he gave no details.

Cuereneia said the government was committed to economic growth and stability and fighting poverty.

(Writing by Pascal Fletcher; Editing by Ed Stoddard and Ron Askew)

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