6:51 CAT | 27 Jun 2017
File photo / Managing Director (MD) of the International Monetary Fund (IMF) Christine Lagarde
The International
Monetary Fund had suspicions about Mozambique’s hidden loans almost a
year before the government finally admitted it had undisclosed debt,
email exchanges between the fund and the government show.
The communications, seen by Bloomberg and
confirmed by the IMF, show for the first time how the fund sought to
uncover the state’s concealment of its borrowings as far back as May
2015. The government’s eventual disclosure in April 2016 of more than $1
billion of previously hidden loans led the fund and 14 donor countries
to freeze aid last year. Mozambique’s growth rate shrank by almost half
to 3.4 percent and the metical slumped 49 percent against the dollar in
2016 partly because of fallout from the discovery of the debts.
In one email exchange, the fund’s
representative in Mozambique sent queries to a finance ministry official
in May 2015 about a $372-million loan arranged by Credit Suisse Group
AG for state-owned security company ProIndicus. The IMF wanted to know
whether the debt was part of an already public $850 million credit to
state-owned fishing company Ematum two years earlier, warning it could
be a case of misreporting to the fund’s board if the loan hadn’t been
previously declared.
The ministry acknowledged receipt of the email and referred further questions to ProIndicus President Antonio do Rosario.
Confirming Transaction
“The purpose of the exchange with the
authorities was precisely to confirm whether the transaction had taken
place and on what date,” the IMF said in response to questions sent by
Bloomberg about the contents of the emails. The Washington-based lender
“was always informed by the authorities, including in response to our
requests in May 2015,” that the ProIndicus loan was part of the $850
million Ematum facility, it said.
Mozambique defaulted on its debt in
February, 10 months after the government revealed $1.4 billion of debt
it had previously hidden. It’s missed two more interest payments since
then, as it seeks to restructure the loans. The advances were arranged
by banks including Zurich-based Credit Suisse, Moscow-based VTB Capital
Plc and Palomar Capital Advisors Ltd. of Switzerland. The companies have
not been accused of any wrongdoing.
The Mozambican authorities repeatedly
told the IMF, including in the response to the May 2015 email, that the
ProIndicus loan was “part of the Ematum financing package and that the
loans had not been signed as separate loans,” the fund said in its
statement to Bloomberg. “It was only in April 2016 that we became aware
that ProIndicus was a separate loan and obtained the signed guarantee
from the authorities, something they had been denying until then.”
The email exchange took place between
Alex Segura-Ubiergo, the IMF’s then-resident representative in
Mozambique, and Isaltina Lucas, who was permanent secretary at the
Ministry for Economy and Finance at the time. She was appointed deputy
finance minister in March 2016.
Loan Increased
Segura-Ubiergo’s queries cited a February
2013 Credit Suisse memorandum that showed the ProIndicus loan was for
$372 million. Ultimately, the loan was increased to $622 million, the
government said in November last year.
Lucas didn’t reply to emailed questions
and didn’t answer a call seeking comment. The government has no
knowledge of the email exchange with the IMF, Rogerio Nkomo, a spokesman
for the ministry, said in an emailed response to questions. Credit
Suisse declined to comment.
ProIndicus in March missed a $119 million
amortization payment on its debt, which is guaranteed by the
government. Last month, state-owned Mozambique Asset Management also
skipped a $134 million payment on its state-guaranteed loan. The
government in February defaulted on the Eurobond it converted the Ematum
loan into.
Do Rosario at ProIndicus didn’t respond to an email seeking comment.
As a condition to reinstate its economic
program in Mozambique, the IMF last year asked the government to
commission an international, independent audit of the hidden debt, and
the state appointed Kroll LLC to carry it out. Authorities in the
world’s ninth-poorest country are seeking to restructure the debt, but a
group of Eurobond holders have resisted, saying they first want to see
the results of the Kroll audit, as well as the outlines of a new IMF
program.
The audit, published on June 24, found
Mozambican state companies failed to account for about a quarter of the
proceeds of $2 billion of loans being investigated. President Filipe
Nyusi said after the report’s release that the government will support
the attorney-general in punishing anyone found guilty of wrongdoing in
the audit.
Source: Bloomberg
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