Mozambique is trying to restore credibility with the International Monetary Fund (IMF) after the Breton Woods institution discovered last week that Maputo had concealed a debt of $1.378 billion.
The fund suspended its finance to the southern African nation last week after it emerged the country deliberately kept the existence of loans, taken out to purchase security equipment to protect big gas supplies discovered off Mozambique’s coast, secret from the IMF.
IMF and Mozambique to continue joint work on the implications of the recent disclosures of debt – IMF Michel Lazare https://t.co/ygRACyf1ia— IMF (@IMFNews) April 23, 2016
The authorities acknowledged that an amount in excess of $1 billion of external debt guaranteed by the government had not previously been disclosed to the Fund.
Mozambique tries to explain the $1.4 billion hidden debt that has the IMF quite upset https://t.co/t1vcki9G87— Charles Onyango-Obbo (@cobbo3) April 27, 2016
The Washington based fund learned of the undisclosed borrowing last week but Mozambique’s Finance Minister Adriano Meleiane initially dismissed the suggestion, speaking only of “some confusion”.
Prime Minister Carlos Agostinho do Rosario then flew to the United States earlier this week to meet with IMF Managing Director Christine Lagarde and a finance ministry team worked with the IMF Mozambique staff to explain the borrowing.
“The authorities acknowledged that an amount in excess of $1 billion of external debt guaranteed by the government had not previously been disclosed to the Fund,” IMF mission chief for Mozambique, Michel Lazare, said in a statement.
Once buoyed by discoveries of natural gas deposits, Mozambique has now become high risk, and the yields on the bonds it took out to save state-owned companies have soared since the IMF’s announcement, according to Bloomberg.
The scandal risks other donors following the IMF’s lead which will be disastrous for a budget that relies on aid as about a quarter of all finance.
IMF has in the meantime suspended a $165m disbursement, part of a $268m emergency loan package agreed last October and also cancelled a visit to the country.