On Wednesday, the remarkably poor African nation of Mozambique received a delegation from the International Monetary Fund (IMF). The IMF was invited to visit Mozambique to help the government find a way out of a crisis of debt that has crippled the nation and could lead to civil and political unrest.
The IMF delegation is scheduled to stay until June 24, but diplomats and analysts do not appear optimistic about the chances of a successful resolution. Mozambique acquired more than $2 billion in private debt deals while already indebted to a number of foreign nation donors.
Mozambique counters those complaints, saying $1.86 billion of the nation’s debts acquired from Credit Suisse and VTB Bank (Russia) were illegally obtained and that the current administration should not be obligated to pay them.
In response to this conflict and the low odds of success for the IMF delegation, the national currency of Mozambique, the Metical, dropped 10 percent on Wednesday to an all-time low of 66 against the dollar. This downturn in value will likely lead to inflation, which is already at 18 percent.
IMF’s Managing Director, Christine Lagarde, accused the African nation of failing to provide the requisite level of transparency, and opined that this indicated that the nation was “clearly concealing corruption.”
The group argued that the Credit Suisse and VTB Bank loans are invalid, and cite laws that would require the government to get the approval of parliament before acquiring debts that would last longer than one year.
Although the government has agreed to allow an inquiry into this matter, the IMF diplomats expressed doubt that such an inquiry would actually ask the tough questions needed to uncover any wrongdoing by the leaders of the ruling party, the Frelimo Party.
As one diplomat put it, “Frelimo has its own version of accountability, which normally involves car crashes or people disappearing.”
Among the questionable loans was an $850 million Eurobond issued in 2013 that was supposed to be used to finance a tuna fleet. Instead, that money was actually spent on a $500 million defense project. Other deals included a $622 million loan and a $535 million loan to two state-owned companies with ties to the nation’s intelligence services.
In both cases, the loans were supposed to go to projects to benefit the people of Mozambique and improve its economy. Instead, they were misapplied and the projects they were supposed to fund remain incomplete.