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.
“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.
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.