MAPUTO, — Mozambican prosecutors have opened investigations into all three of the government-guaranteed loans, contracted in 2013-14, which have dramatically increased the country’s foreign debt.

A statement issued by the Attorney-General’s Office here Friday said the investigation into the 850 million US dollar government-guaranteed bond issued by the Mozambique Tuna Company (EMATUM) was launched in August last year.

This came after the matter was raised in Parliament by opposition parties, which demanded that Attorney-General Beatriz Buchili take action.

At the time, a deputy for the Mozambique Democratic Movement (MDM), Venancio Mondlane, demanded that former President Armando Guebuza should be arrested for his part in the EMATUM deal.

Last month, two other government guaranteed loans came to light, contracted by the public companies Proindicus and Mozambique Asset Management (MAM).

Proindicus is intended to provide security services for oil and gas companies operating in Mozambican waters, and to protect shipping in general. It took loans from the Swiss and Russian banks, Credit Suisse and VTB, amounting to 622 million USD.

MAM was set up to provide maintenance and repair services to Proindicus and other companies operating in the Mozambique Channel. The government guaranteed a loan of 535 million dollars for this company.

These loans were not disclosed either to the Mozambican public, or to the country’s foreign partners, notably the International Monetary Fund (IMF).

When the existence of the loans was discovered, the IMF cancelled a mission that was to have visited Mozambique in April. It also suspended the second instalment of a loan for 282 million USD under the IMF’s Standby Credit Facility (SCF), originally agreed last October.

Subsequently, two major supporters of the Mozambican budget, the World Bank and the British government, announced that they were suspending financial aid to Mozambique.

The Attorney-General’s Office said investigations into the Proindicus and MAM loans were ordered on April 20. “The collection and analysis of elements is under way, in order to take appropriate measures in terms of the law,” the statement said.

The government guarantees for these companies certainly violated the budget laws for 2013, and for 2014.

Every year, the budget law stipulates a limit to the amount of guarantees that the government can issue. In the 2013 budget, as passed by Parliament in December 2012, that limit was 183.5 million meticais (equivalent to about 6.2 million USD).

Because of the row over EMATUM, in the 2014 Budget, passed in December 2013, Parliament dramatically increased the limit on guarantees to 15.783 billion meticais (about 515 million USD).

Presumably the deputies did not know about the Proindicus and MAM loans, since they were never mentioned in Parliament. Certainly the limits on guarantees stipulated in the 2013 and 2014 are nowhere near high enough to cover the EMATUM, Proindicus and MAM debts.

Arguments have also been made that the three guarantees were illegal, because neither the EMATUM bond, nor the Peoindicus and MAM loans were authorized by Parliament.

This argument is shaky, because there is a general authorization in budget laws for the government to contract loans.

However, the laws also stipulate that if the government contracts foreign loans, the interest rate, the period of grace and the various other conditions attached “must guarantee a degree of concessionality equal to or greater than 35 per cent”.

There is nothing concessional about the Proindicus and MAM loans. According to Finance Minister Adriano Maleiane, the Proindicus loan is to be repaid in the next five years at an interest rate of LIBOR (London Inter-Bank Offered Rate) plus 3.75 per cent.

For the MAM loan, the terms are tougher. The repayment period is only four years at an interest rate of LIBOR plus 7.7 per cent.