It’s been barely 10 years since international creditors wrote off more than US$6 billion of loans to Mozambique as part of the Highly Indebted Poor Countries (HIPC) initiative which wiped out a total of $99bn in debt to 36 countries, 30 of them in Africa.
HIPC was supposed to spring these hopelessly indebted countries from a debt trap they could otherwise not escape and allow them to start diverting their huge debt-servicing costs payments to critically needed social services instead.
But now Mozambique is showing alarming signs of plunging back into unserviceable debt.
Last month it was revealed that the government had not disclosed government guaranteed loans amounting to more than a billion US dollars, either to the Mozambican public, or to the International Monetary Fund (IMF), the World Bank’s sister body.
The IMF, which had been working with Maputo to help it repay a previously disclosed debt of $850m, regarded the government’s failure to disclose the US$1bn-plus extra debt (some analysts believe it could be as high as $1.5bn) as a breach of trust.
So it cancelled a mission to Mozambique in mid-April, and suspended the second instalment of a US$282m dollar loan to the country.
Last week, two of the major contributors to the Mozambican budget, the World Bank and the British government, also suspended financial aid to Mozambique, and it is feared that other donors could follow suit.
The loans to state or parastatal companies were secretly guaranteed in 2013-2014 by the previous government led by President Armando Guebuza.
The Mozambique Tuna Company (Ematum) borrowed $850m; Proindicus, which is supposed to provide maritime security, particularly for offshore oil and gas operations, took $622m; and Mozambique Asset Management (Mam), set up for maritime repair and maintenance, borrowed $535m. This totals more than $2bn.
But the journal Africa Confidential reports that a further and still undisclosed loan from a Russian bank to Proindicus could push this total to about $2.35bn.
Even at the lower figure, the new loans have raised public debt to alarming levels; $11.64bn, of which $9.89bn dollars is foreign debt.
The price of servicing these debts will be “breathtaking” as Independent’s Mozambique correspondent, Paul Fauvet, puts it. As from next year, servicing the Proindicus debt will cost $119m a year. The first Mam payment falls due this month and is $124m.
The Mozambican government successfully swopped the original Ematum loan titles for sovereign government debt, which extends the payment time – but even so, the yearly interest payments are $78m.
So servicing these three loans alone will cost Mozambique $321m in 2017, on top of the normal servicing of the other $7.8bn of debt.
And this at a time when foreign aid is declining, the prices of key Mozambican exports (such as coal, aluminium, cotton and sugar) have fallen, and severe drought has devastated agriculture and livestock.
Whether Mozambique will be able to pay the debt is looking increasingly doubtful. It is begging the IMF to bail it out.
This new debt was not just the result of unfortunate external circumstances or even just bad judgement. It was incurred in even more dubious circumstances, with a strong hint of corruption.
The current government of President Filipe Nyusi has suggested it was unaware of the debts when it took office in January last year. It has hinted that the Guebuza administration hid the debt from it.
The political opposition has demanded the arrest of Guebuza and of the former Finance Minister Manuel Chang, and the attorney-general’s office has promised a thorough investigation into the legality of the Ematum, Proindicus and Mam loans.
The Guebuza government manifestly violated budget laws by far exceeding limits on loans.
The loans are mostly related to Mozambique’s offshore gas fields and the tuna fishing project, which involved the purchase of dodgy, vastly over-priced vessels from France.
Ematum, though, is widely suspected to be a cover for a security company and for bribes to senior officials. No one really believes tuna fishing will come close to repaying the huge Ematum loan.
What is more worrying about this loan is that Nyusi, who came into office as a new broom to sweep out the dirt left by the corrupt Guebuza, seems to be losing a battle for supremacy within Frelimo against his predecessor.
So it seems he may not be able to clean up the loan mess either because it probably benefited Guebuza and his cronies. Guebuza is evidently also driving a military rather than a negotiated solution to the opposition political party/rebellion Renamo, which is once again going on the offensive. All of this spells more trouble.
When Mozambique discovered vast few reserves of gas and oil a few years ago, analysts asked whether those would be managed honestly and efficiently for the good of the country – or whether they would simply feed corruption and line the pockets of politicians and officials.
In other words, would they be a resource blessing or yet another resource curse.
We are now beginning to get the answer.