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Nurses and teachers are among those bearing the brunt of a debt crisis rooted in the mistaken belief that major gas reserves would bring untold riches. This is the situation Mozambique is living after that £1.6 billion borrowing spree has caused a fiscal crisis which interrupted the payment of interests on loans, of the civil service annual bonuses and of other government bills.

Four years ago, with one of the largest natural gas reserves in development in Africa ( and visions of amazing wealth before them, Mozambique’s leaders took secret loans of 2 billion dollars. These ones were organized by the London offices of two European banks, the Credit Suisse and the Russian state-owned bank VTB, whose conduct has been questionable since they are being investigated by financial authorities in the UK, Switzerland and the US.

On the one side there is the Mozambique government, which stole the money, lying to its own parliament and to the International Monetary Fund, and used it for tuna fishing, maritime security and weapons to fight Renamo rebels. At the moment gas prices collapsed, the development of the gas fields was delayed; it has become clear that there was no money to pay and the loan package has become public. On the other side, there are the International Monetary Fund and its donors, including Great Britain, which have immediately reduced any aid and lending (, thus exacerbating the pre-existing economic crisis and forcing an austerity program. As a consequence, there has been a devaluation of the local currency, the metical, reaching a 2016 inflation rate of about 25%, the Mozambique’s government is delaying all the payments to its suppliers and civil servants, including teachers and nurses, who normally receive a monthly salary as some new year bonuses, have found the extra money halved.

Details of the loans remain secret, but a Mozambican parliamentary investigation ( reported last month showed that the government’s justification to use the loans was ridiculous assuming the country could sell fish for four times as much as Seychelles or that multinational companies would hire an untried Mozambican security company to protect offshore gas wells. Finance Minister Manuel Chang stated that the state would guarantee to repay the loans, but the parliamentary commission has concluded that his guarantees were illegal, unconstitutional and invalid. Furthermore, it added that this should have been obvious since only parliament can guarantee loans.

In Mozambique all the fingers are pointed at former President Armando Guebuza and a small team around him, including Finance Minister Chang and the Mozambican security services (“SISE”) that owned the three private companies the loans were made to, while in Great Britain more and more questions are being asked about Credit Suisse and VTB (; they sold bonds and pieces of loans to investment funds and other lenders, and it is not clear what they told these lenders. On large loans like these ones, banks usually do a “due diligence” study, looking at the viability of the loan and the borrower; every study would have shown that the state guarantee signed by Finance minister Chang was not valid and that the feasibility studies, together with the repayment plans, were nonsense. In addition, by keeping the loans secret, these European banks did not revel to the bond and loan holders that £2 billion dollars loan package pushed Mozambique’s debt to unsustainable levels, making repayment unlikely (

When a loan is made ignoring obvious evidence that is unwise, the loan must be called illegitimate; in this sense, the liability is of the lender, not the borrower. Mozambicans and lenders are both angry and severe complaints that the secret £2 billion dollars Mozambique loans are illegitimate are increasing. In this sense, the supposed guarantees of the government, which remains guilty for having stolen the money, were clearly invalid from the start and the people of Mozambique cannot pay for this. The tension is high and it needs some time to see if Credit Suisse and VTB will take responsibility for the loans (

In conclusion, the Mozambique current situation has to be considered as a multi-regional matter of concern since its debt crisis could be the fist sign of a global financial shockwave. Mozambique is financially connected to other African countries and European countries, such as Great Britain, own many African governments’ bonds; this might be an early warning sign of a greater world debt crisis (


The gLAWcal Team

LIBEAC project

Sunday, 5 February 2017

(source: The Guardian)