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By Tyler Durden

Mozambique has a broad swath of problems within its governing councils. Back in December of 2005, Management Systems International based out of Washington issued a report titled CORRUPTION ASSESSMENT: MOZAMBIQUE which said point blank: “The scale and scope of corruption in Mozambique are cause for alarm”.

Mozambique’s head of state Joaquim Chissano left office in February 2005 after 15 years. His replacement, Armando Guebza, that same year opened Mozambique’s coastline to international companies seeking to search for resources. Between 2005 and 2006 three firms were able to capture rights to explore the coast, Anadarko, Italy’s Eni, and Petronas. Some 75 trillion cubic feet of natural gas was discovered and this set of a a blitz into Mozambique as international banks, corporations, and organizations flooded the area. This opened a breeding ground for corruption and unregulated financing, specifically the controversial Tuna Bond that was supposed to be used to support regional fishing and was instead used for military expenditures and to purchase some 40 boats that remain anchored to this day.

The Collapse Of Mozambique’s FX – Annotated With Key Events

On Friday Reuters said the IMF blamed “undisclosed loans” for Mozambique’s 86% Debt/GDP ratio.

“Mozambique’s economic growth will likely slow to 4.5 percent in 2016 from 6.6 percent the previous year due to rapidly rising inflation and growing government debt, the International Monetary Fund said on Friday. The leader of a Fund team that visited the southern African country, Michel Lazare, said the discovery of more than $1 billion of previously undisclosed government debt would increase pressure on the economy.”

On April 19 2015 the IMF suspended its disbursement of $155M payment as part of a larger $286M emergency loan that was established as a means of stabilizing the nation’s currency after it collapsed. What’s frustrating is that the IMF is blaming the 86% Debt-to-GDP as if they had not planned for it.

In the same November 2013 report the IMF expected 70% Debt/GDP under an aggressive scenario when planning for the government expenditures of Mozambique in lieu of the country’s LNG discovery:

For the IMF to say the undisclosed loan is the blame for the nation’s current Debt/GDP is somewhat laughable. On April 25 Public Finance International estimated the undisclosed loan amounts to an impact of 10% to Debt/GDP.

To wit: “The undisclosed loans, both of which went to state-owned companies, add the equivalent of around 10% of gross domestic product to the government’s known debt burden.”

Now that the UK is leaving the EU, there is global panic regarding stability and we’re beginning to see the early stages of the debt blame game play out. We await Chair Yellen’s Brexit excuse next for interrupting the Fed’s effort to create an economic recovery.

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Source: IMF Blames Bad Loans For Mozambique’s Soaring Debt-To-GDP Ratio

    

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Posted June 25th, 2016 in Uncategorized.

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