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IMF halts aid to Mozambique over $1b hidden debt


International Monetary Fund Managing Director, Christine Lagarde

International Monetary Fund Managing Director, Christine Lagarde

The International Monetary Fund (IMF) has suspended funding to Mozambique following the discovery of more than $1 billion in previously undisclosed government debt, reports the Financial Times.

The IMF said Mozambican authorities confirmed the existence of the previously undisclosed borrowing secured in 2013 and 2014 last week.

The international lender has as a result, suspended the disbursements of $155 million of a $286 million emergency loan it agreed with Maputo in October and has subsequently canceled a visit to the country this week, the Financial Times noted.

The scandal is expected to pile up pressure on the government of the southern African nation, which depends on donors to finance about a quarter of its budget.

“It is probably one of the largest cases of the provision of inaccurate data by a government the IMF has seen in an African country in recent times. They deliberately kept from us at least $1billion, possibly higher, of hidden loans,” the Financial Times quoted an unnamed IMF official as saying.

The official also warned that other donors could freeze disbursements of up to $400 million, which would then lead to “a fiscal crisis and a balance of payments crisis.”

Mozambique is battling to narrow its wide fiscal deficit as its currency has plummeted and foreign reserves dwindled.

The country’s currency, the metical, plunged 32 per cent against the dollar last year, making it the worst performer in Africa after Zambia’s kwacha.

The latest revelations come shortly after another controversy involving a state-backed $850 million bond, ostensibly issued to set up a tuna fishing company, Ematum. $500 million of the debt was said to have been spent on naval vessels and other security equipment.

The loan related to the bond significantly increased the cash-strapped government’s debt burden, while breaching its own ceilings on state-guaranteed borrowing, triggering rating agency downgrades.

Details of the previously undisclosed loans, which add up to about the equivalent of 10 per cent of gross domestic product to the government’s known debt burden emerged last month after the Ematum (tuna) bond was restructured.

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