Massive Debt Revelation Another Blow to Mozambique’s Economy

Massive Debt Revelation Another Blow to Mozambique’s Economy
View of the Port of Maputo, Mozambique, Aug. 15, 2006 (Flickr photo by Julien Legarde, licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic).

Mozambique’s government was recently revealed to have borrowed $1.4 billion in previously undisclosed loans. In an email interview, Fernanda Massarongo Chivulele, a researcher at the Institute of Social and Economic Studies in Maputo, discussed the loan scandal and the fallout for Mozambique’s politics and economy.

WPR: What is the background of Mozambique’s debt crisis, and what are the immediate consequences and implications for the donor-dependent government budget?

Fernanda Massarongo Chivulele: Mozambique was taken by surprise by an April report in The Wall Street Journal about the existence of an undisclosed loan to the government in 2013, around the same time a $850 million loan to the state-owned Mozambican Tuna Company (EMATUM) had been signed. (The proceeds from the EMATUM loan had subsequently been diverted to purchase vessels for Mozambique’s navy, instead of to buy a fishing fleet for the company, as had been announced.) The existence of two more undisclosed loans contracted by the government totaling $1.4 billion was also discovered. These revelations made it clear that Mozambique’s official debt is $11.6 billion, rather than $10 billion, or nearly 76 percent of gross domestic product. That is even higher than it was in 2005, when the country took part in the International Monetary Fund’s Multilateral Debt Relief Initiative, a program that provided 100 percent relief of debt from the IMF, the World Bank and the African Development Fund to low-income countries.

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