The International Monetary Fund has suspended aid to Mozambique after finding that the southern African nation allegedly had at least $1 billion in previously undisclosed government debt. The IMF has also canceled a planned trip to Mozambique this week in light of the discovery, the Financial Times reported Monday.
“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 $1 billion, possibly higher, of hidden loans,” an IMF official told the newspaper, warning that other donors could freeze disbursements of $350 million to $400 million. “Mozambique is close to a financial crisis if the authorities don’t take action to deal with the current risks.”
The IMF, an organization of 188 countries that promotes international financial stability and monetary cooperation, announced Friday it believed Mozambique had concealed borrowing for its defense sector from Credit Suisse and Russia’s VTB Bank. So the fund is halting disbursements of $155 million of a $286 million emergency loan it agreed to with Mozambique last year to help buffer its economy, following steep drops in commodity prices. The IMF said the alleged undeclared loans had changed its assessment of the country’s macroeconomic outlook, according to Reuters.
Mozambique Finance Minister Adrian Malian, however, has insisted the country has no hidden loans.
“There was some confusion which has ended up creating problems for Mozambique groundlessly,” he was quoted by the state news agency as saying Sunday. “The international community will realize that, firstly, Mozambique is a country that has never failed to pay, and secondly, we have said to all investors that all that has a state guarantee is secure — we honor our commitments.”
The IMF’s accusations come shortly after another controversy involving a state-backed $850 million bond that launched in 2012 to set up a state tuna-fishing company, Ematum. Some $500 million of the debt was found to be spent on naval vessels and other defense equipment. The latest revelations will likely damage the cash-strapped government’s efforts to repair its reputation with donors and investors.