IMF tackles Mozambique's debt crisis
An International Monetary Fund team arrived in Mozambique this week to try to find a way out of a sovereign debt crisis that is crippling the economy of one of the world's poorest countries, and could trigger social and political unrest.
Diplomats were not optimistic about the success of the IMF mission, given anger among donor nations after the government ran up more than US$2 billion (N$30.4 billion) in private debt deals behind their back.
Lack of transparency
Reflecting the scepticism, the metical plunged 10% on Wednesday to a record low of 66 against the dollar...a decline that is likely to fuel inflation, already at 18% and squeezing Mozambique's 25 million people.
A coalition of 26 Mozambique civil society groups said this week that US$1.86 billion (N$28.3 billion) of the loans arranged by Credit Suisse and Russia's VTB Bank was illegal and should not be paid.
IMF managing director Christine Lagarde said last month the lack of transparency behind the transactions was "clearly concealing corruption". She did not elaborate.
The Mozambique civil organisations said the loans breached a law requiring all borrowing and guarantees longer than a year to be approved by parliament. They called for those responsible in the government and the banks to be held accountable.
The southern African nation's parliament has agreed to open an inquiry, although diplomats doubt it will ask too many tough questions of leaders of the Frelimo party, which has dominated politics since the end of a civil war in 1992.
"Frelimo has its own version of accountability, which normally involves car crashes or people disappearing," one regional diplomat said. "The number one priority is to get some of this money back."
The loans include an US$850 million (N$12.9 billion) Eurobond issued in 2013 to finance a tuna-fishing fleet.
Subsequently, it emerged that US$500 million (N$7.6 billion) of the cash was actually spent on defence equipment and has since been re-allocated to the defence budget.
Maritime security
The fleet of tuna-fishing boats, built in France, are now rusting in Maputo harbour and need to be refitted to meet European Union standards, according to Finance Minister Adriano Maleiane.
The other two deals are a US$622 million (N$9.5 billion) loan to Proindicus, a state-owned company partly owned by the intelligence services and US$535 million (N$8.1 billion) to Mozambique Asset Management (MAM), also owned by the intelligence services.
The Proindicus funds were earmarked for maritime security and the MAM debt was to build shipyards to service a nascent offshore gas industry. The shipyards have not been built.
NAMPA/REUTERS
Diplomats were not optimistic about the success of the IMF mission, given anger among donor nations after the government ran up more than US$2 billion (N$30.4 billion) in private debt deals behind their back.
Lack of transparency
Reflecting the scepticism, the metical plunged 10% on Wednesday to a record low of 66 against the dollar...a decline that is likely to fuel inflation, already at 18% and squeezing Mozambique's 25 million people.
A coalition of 26 Mozambique civil society groups said this week that US$1.86 billion (N$28.3 billion) of the loans arranged by Credit Suisse and Russia's VTB Bank was illegal and should not be paid.
IMF managing director Christine Lagarde said last month the lack of transparency behind the transactions was "clearly concealing corruption". She did not elaborate.
The Mozambique civil organisations said the loans breached a law requiring all borrowing and guarantees longer than a year to be approved by parliament. They called for those responsible in the government and the banks to be held accountable.
The southern African nation's parliament has agreed to open an inquiry, although diplomats doubt it will ask too many tough questions of leaders of the Frelimo party, which has dominated politics since the end of a civil war in 1992.
"Frelimo has its own version of accountability, which normally involves car crashes or people disappearing," one regional diplomat said. "The number one priority is to get some of this money back."
The loans include an US$850 million (N$12.9 billion) Eurobond issued in 2013 to finance a tuna-fishing fleet.
Subsequently, it emerged that US$500 million (N$7.6 billion) of the cash was actually spent on defence equipment and has since been re-allocated to the defence budget.
Maritime security
The fleet of tuna-fishing boats, built in France, are now rusting in Maputo harbour and need to be refitted to meet European Union standards, according to Finance Minister Adriano Maleiane.
The other two deals are a US$622 million (N$9.5 billion) loan to Proindicus, a state-owned company partly owned by the intelligence services and US$535 million (N$8.1 billion) to Mozambique Asset Management (MAM), also owned by the intelligence services.
The Proindicus funds were earmarked for maritime security and the MAM debt was to build shipyards to service a nascent offshore gas industry. The shipyards have not been built.
NAMPA/REUTERS
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