IMF Wants Full Mozambique Debt Audit as Bondholders Slam Default

MAPUTO (Capital Markets in Africa) – The International Monetary Fund said Mozambique must publish the full audit of hidden debt before it will consider resuming lending, as bondholders criticized the government’s latest default on its Eurobonds.

The IMF welcomed the release last month of a summary of the Kroll LCC audit, saying it constituted an “important step toward greater transparency,” spokesman William Murray said at a briefing in Washington Thursday. The fund will consider re-engaging with Mozambique once the more detailed report is released, he said.

“We want to see full publication of this audit report for transparency,” he said. “There are information gaps, in particular on the use of the loan proceeds. We want to see those information gaps closed.”

Mozambique defaulted on its debt in February, 10 months after the government revealed $1.4 billion of debt it had previously hidden. A Kroll audit of the debt, commissioned by the country’s attorney-general, found that three state-owned companies failed to fully account for $2 billion of government-backed loans they took in 2013 and 2014.

The government has missed three other payments on its debt since February, as it seeks to restructure the loans. The latest payment was missed on July 18, drawing criticism on Friday from a group of key Mozambique bondholders. The Finance Ministry’s statement on the default ignored improvements in the Mozambican economy over the past nine months, it said.

“Evidently, the payment default is strategic and undermines the government’s stated intention to normalize relations with international creditors and donors,” the group said in an emailed statement.

Source: Bloomberg Business News