Japan freezes US$100M in grants and loans to Mozambique amid debt talks

Japan says it has frozen about $100 million worth of grants and loans to Mozambique, in the wake of the scandal following the discovery of more than $1bn in previously undisclosed government debt, APA learned on Thursday.

A representative of the Japanese International Cooperation Agency (JICA), Katsuyoshi Sudo, is quoted by the local media on Thursday as saying around $100 million of aid is now frozen, and will only be released once Mozambique has reached a new agreement with the International Monetary Fund (IMF).

The official said economic relations between Japan and Mozambiquen, where Japan annually Japan has invested between 120 and 140 million dollars in the form of grants, loans and projects is not affected.

“The crisis is teaching us to be more rational in handling our resources, and we will only release this $100 million once Mozambique has reached a new agreement with the International Monetary Fund (IMF).” Sudo reportedly said.

A team from the IMF arrived in Mozambique since Monday for a ten-day working visit to discuss with the government the results of the audit carried out by a U.S. auditing firm Kroll, which looked into $2 billion in “secret loans” reportedly taken by state-controlled companies,
When the full extent of this hidden debt was revealed in April 2016, the IMF suspended its programme with Mozambique, and other major donors and funding agencies followed suit.

A pre-condition for the resumption of aid was an independent audit of Ematum, Proindicus and MAM, and to this end the Mozambican Attorney-General’s Office (PGR) hired the London branch of the US company Kroll Associated, reputedly the top forensic auditing company in the world.

The executive summary of the Kroll audit report was released in June, revealing that the management of the three companies sabotaged the audit. Kroll complained that it had not received full cooperation and that the companies had withheld information.

The scandal is heaping pressure Maputo, which is dependent on donors to finance about a quarter of its budget.

Mozambique is battling to narrow a wide fiscal deficit and its currency has plummeted while its foreign reserves are dwindling.

The controversy is also adding greater scrutiny to the role of international banks in providing lending to poorer nations.

Source: Journal du Cameroun