Over recent days it has come to light that Credit Suisse and VTB lent around $1.35 billion to Mozambique, but the government and the lenders hid this from any public oversight. The revelations have led the IMF to suspend bailout loans which were helping Mozambique pay its debt to external lenders.
Credit Suisse is holding its AGM on 29 April. Commenting ahead of the AGM, Tim Jones, policy officer at Jubilee Debt Campaign said:
“Credit Suisse is responsible along with the Mozambican government for these debts being hidden from the Mozambican people and the IMF. It is unjust to lend money for military purposes, and irresponsible and undemocratic for such debts to be covered up. Credit Suisse and VTB should pay the price for these illegitimate loans, and should not be bailed out by the IMF or anyone else.”
In December 2015, Mozambique was assessed by the IMF as at moderate risk of not being able to pay its’ external debt, but with heightening risks due to the fall in global commodity prices and consequent depreciation of the Metical against the Dollar.
This was based on Mozambique’s government debt being $11.2 billion, 73.4% of GDP, and external debt payments of $500 million in 2016, 12.6% of revenue. Recent revelations have increased the debt from $11.2 billion to $12.5 billion, 82.2% of GDP.
These are not the only recent developments on Mozambique’s debt. An $800 million bond was issued in 2013, under English law, at 8.5% interest rate, supposedly to fund a tuna fishing fleet. However, it has now been revealed that much of the money was spent on the military, and the bond was not agreed by Mozambique’s parliament. The bond was restructured in March 2016, but in a way that only changes when payments are made, not reducing overall payments.
Since the beginning of 2013 the Mozambique Metical has fallen 40% against the US dollar. Prices for Mozambique commodity exports such as aluminium, oil, coal, gas, titanium and sugar have been falling. Before the revelations, Mozambique was expected to spend 12.6% of government revenue on external debt payments in 2016, compared to a prediction by the IMF of 6.7% three years ago. However, with the Credit Suisse and VTB loans, the situation is in reality even worse.