Even by the standards of Africa, it’s been a wild ride for Mozambique. There’s little sign it will end well.
Blowing through more than $2 billion of borrowed money just as the currency and the price of commodity exports plunged has left the former Portuguese colony with near-empty coffers, Bloomberg reported.
Its creditors, which bought debt sold by Credit Suisse Group AG and VTB Group, may be left holding the bag.
Nor does it help that the International Monetary Fund is raising questions about the government’s transparency and its finances.
“Mozambique is not in a state of development where it can maintain a credible foothold in the global financial markets,” said Jan Dehn, head of research at Ashmore Group Plc, which manages $53 billion of emerging market assets and opted not to buy Mozambican bonds. “It was more like, someone got an idea one day to issue a bond.”
That was back in 2013, when the desperately poor country was a symbol of postwar recovery and Africa’s rise.
Anadarko Petroleum Corp. and Eni SpA had discovered offshore gas fields so big that Standard Bank Group said Mozambique could turn into the next Qatar.
Growth since the end of a 16-year civil war in 1992 had averaged 7.4%. Credit Suisse and Russia’s VTB provided financing to companies to help build the economy. The banks then went on to package and sell the debt to other investors hungry for high returns at a time when yields in the developed world were reaching record lows.
Concealed Loans
Mozambique’s borrowing produced a few surprises. A loan for $850 million, for instance, went to a new state-owned tuna-fishing company. What the offering documents didn’t say was that the government would also use some of those funds to purchase search and rescue and surveillance vessels. And two other loans from 2013 and 2014, totaling $1.4 billion, weren’t disclosed to parliament or to the IMF and were only discovered in April.
Mozambique was in much more debt than had been known, at a time when the currency was plunging, gas exploration was delayed and prices of gas, coal and aluminum exports were down.
The April disclosure of the loans caused the IMF to halt a $286 million bailout loan signed only last October.
Managing Director Christine Lagarde in May accused the government of using debt for “concealing corruption”.
Western donors including the UK and Portugal have suspended about $500 million in aid for this year.
The nation missed an interest payment and yields on its dollar bonds have almost doubled in the past year, to 18.38%.
Inflation has soared to 20%, which raises the risk of riots over higher food prices, according to Standard Chartered Plc.
