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Is Mozambique The Greece Of Africa? A Fishy Tale Of $1B Hidden Debt

Is Mozambique The Greece Of Africa? A Fishy Tale Of $1B Hidden Debt

Mozambique’s finance minister on Saturday came clean and admitted that the country had hidden over $1 billion in debts from the International Monetary Fund (IMF), after initially dismissing the claims as “some confusion”.

On April 3, the Wall Street Journal published an article that the Southern African country had not disclosed over  a billion dollars in external debt to the IMF. The fund reacted by suspending a visit by its mission to the country and halting disbursement of $165 million, the second tranche of a $283 million loan agreed last October from the Fund’s Standby Credit Facility.

This forced Mozambique’s Prime Minister Carlos Agostinho do Rosario to make a visit to Washington to have talk with the IMF Managing Director Christine Lagarde and World Bank officials.

It was after this visit that the IMF announced on Saturday that it was evaluating the impact of the undisclosed debt secretly  held by the Southern African country.

“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,” the lender said in a statement on its website.

“Looking ahead, the Fund and Mozambique will continue to work together constructively to evaluate the macroeconomic implications of this disclosure of information and identify steps to consolidate financial stability, debt sustainability and enhance governance and oversight of public enterprises.”

The undisclosed loans, both of which went to state-owned companies, add the equivalent of around 10 percent of gross domestic product to the government’s known debt burden, Public Finance International reported.

Impact on Economy

Mozambique, Africa’s second largest oil producer and a member state of the Southern African Development Committee (SADC), has been facing financial difficulties including a ballooning  budget deficit, a weakening local currency and dwindling foreign reserves.

These troubles could deepen if other donors and lenders follow the IMF in withdrawing their funding to the country.

Mozambique’s credit rating has also been cut in the wake of the evidence of misuse of the money.

This is not the first time the oil producing African nation has been in trouble. The country was accused in 2013 for using $500 million of a $850 million eurobond, ment for buying tuna fishing boats, on police vessels and other security equipment.

“This (revelation) has raised fears of a default ahead of the seven-year payment term,” Dianna Games, CEO of advisory Africa @ Work, said in an opinion piece published by BDlive.