IMF suspends aid to Mozambique
19 April 2016, 22:51
Washington - The International Monetary Fund has suspended aid to Mozambique after discovering the country had hidden debt of more than $1 billion.
"The undisclosed borrowing exceeds $1 billion and significantly changes our assessment of Mozambique's macroeconomic outlook," said Antoinette Sayeh, head of the IMF's African Department, in a statement to AFP on Tuesday.
As a result, the global crisis lender has cancelled a staff mission to the African country this week that was part of its $283 million standby credit facility and a policy support programme from the IMF.
That cancellation of the mission effectively puts on hold any disbursements from the facility. A first instalment of $117.9 million was made in December to help the country cope with lower commodity prices that have depressed revenues.
Mozambican Prime Minister Carlos Agostinho Rosario on Tuesday began an emergency visit to Washington to meet with IMF and World Bank officials.
Aid has been suspended "pending a full disclosure and assessment of the facts," on the unreported borrowing, Sayeh said.
"It is difficult to imagine how the government will provide a satisfactory explanation for its handling of the debt," wrote Anne Frhauf of the New York-based Teneo Intelligence in a note to investors.
"All this will have a massive impact on virtually every financial lifeline available to Maputo, at a time when the country thought it was just getting past its balance of payments tight spot."
Mozambique is one of the poorest countries in the world, and a quarter of its budget comes from donors.
The discovery of oil in 2010 sparked a period of optimistic growth and investment, but the fall in world prices of raw materials saw the local currency, the metical, drop by more than 40% against the US dollar last year.
In December 2014, the IMF froze financial aid to another African country, Mali, for six months after discovering "lapses" in public financial management and the purchase of a new $40 million presidential aircraft.