Mozambique’s $2 Billion Secret Debt Triggers Economic Crisis – All Budget Support Stopped

Revelations that the government of Armando Guebuza took on more than $2 billion in debt in secret are creating a deepening economic crisis. The Group of 14 (G14) budget support donors have all suspended their contributions to the government budget, the President of Portugal, Marcelo Rebelo de Sousa, confirmed yesterday. The IMF had already announced that it would not release any more funds from the agreed standby credit.

Economic and Finance Minister Adriano Maleiane yesterday announced the first spending cuts. These include a hiring freeze and limits to government travel. But he guaranteed that health and education would not be sacrificed. Maleiane said that donor budget support was $467 mn per year, corresponding to 12% of the state budget. Spending cuts will clearly be much more severe.

There are at least three loans to parastatal companies taken in secret in 2013. They are the Mozambique Tuna Company (EMATUM $850 mn), revealed last year and recently renegotiated, and two newly revealed loans, Proindicus to provide maritime security, particularly for offshore oil and gas operations ($622 mn), and Mozambique Asset Management (MAM), set up for maritime repair and maintenance ($535 mn).