IMF reconsiders new loan as Mozambique defaults

31 January 2017

In mid-January, the government of Mozambique announced it will default on a $60 million interest payment, Africa’s first sovereign debt default since Cote d’Ivoire’s in 2011. The balance of payments crisis came after the IMF halted its loan programme with Mozambique in April 2016 in response to the government admitting to holding about $1.4 billion in undisclosed loans. The Fund’s reaction prompted other donors to freeze disbursements and stop budget support.

In a December 2016 report a Mozambican parliamentary commission found that the government guarantee to repay the undisclosed loans was illegal, in particular because the loans were not approved by parliament. The report supported calls in June from a group of 26 civil society organisations in Mozambique for the government not to pay the loans. Sarah Jayne-Clifton of UK-based NGO Jubilee Debt Campaign (JDC) argued in January that “the hidden loans to Mozambique have been devastating for the people of this southern African country”.

Despite these concerns, the IMF announced in early December that “discussions on a new IMF-supported programme will continue in the first part of 2017”, after insisting the country agrees to an independent, international audit of its foreign debt, which is now taking place. Tim Jones of JDC stressed that “a new IMF programme should only be agreed when all those responsible for the undisclosed debts are held to account, including criminally, meaning both officials in Mozambique who signed-off on the loans as well as the banks which facilitated the irresponsible lending”. He continued: “the burden of payment must not fall on the Mozambican people”.