Mozambique: IMF Director Links Undisclosed Loans to Corruption

The Managing Director of the International Monetary Fund (IMF), Christine Lagarde, has publicly accused the Mozambican government of “concealing corruption”, in the scandal over more than a billion dollars worth of government guaranteed loans that were not disclosed, either to the Mozambican public or to the IMF.

Lagarde made her remarks in an interview on the BBC radio programme “Woman’s Hour”. Her brief reference to Mozambique was as follows: “When we put in place a programme with a country, we look at corruption. We look at what reforms could improve the corruption level. When we see a country and a programme with the IMF where international community money is committed, that is not respecting its financial disclosure engagement, which is clearly concealing corruption, we suspend the programme. We did that just recently with Mozambique.”

Lagarde did not name any names, or say which of the government guaranteed loans the IMF regards as corrupt. But this is the first time any senior official has gone on the record to declare that the undisclosed loans were not just a matter of bungling, or excessive secrecy, but involved corruption – and were thus criminal.

In just two years (2013-2014) the previous government, under President Armando Guebuza, added 20 per cent to the country’s foreign debt in the shape of three government-guaranteed loans, organized through the banks Credit Suisse and VTB of Russia, to state or quasi state concerns.

One of these was already known, since it involved raising 850 million US dollars on the European bond market for the purchase of 30 vessels for the Mozambique Tuna Company (EMATUM). But the other two loans were not disclosed, either to the Mozambican public or to the IMF, until April of this year.

They were loans of 622 million dollars to Proindicus, a company set up to provide maritime security, particularly for oil and gas operations in the Rovuma Basin, in the far north of the country, and 535 million dollars for Mozambique Asset Management (MAM), a company intended to provide repair and maintenance services for the boats of EMATUM and Proindicus and for other shipping in the Mozambique Channel.

As the weeks slip past, so more embarrassing revelations about these loans become public. Last week, for example, Finance Minister Adriano Maleiane, admitted that the EMATUM fishing boats are in no condition to export tuna to the European Union.

Although the boats were built at the CMN shipyard in the French port of Cherbourg, they do not meet European Union specifications demanded of vessels that catch fish to be exported to the EU. No-one has yet explained how fishing boats built in a shipyard located in the European Union fail to meet EU standards.

The result is that yet more money is being spent on the boats. Ten of EMATUM’s 24 fishing boats are being refitted by a South African company. The money is not available to refit all 24 at the same time.

Mozambique’s Nordic partners were suspicious of the EMATUM boats (both the fishing boats and the six patrol vessels) at least two years ago. A devastating article appeared in the Norwegian foreign aid magazine “Bistandsaktuelt” in June 2014, updated in April 2015. It received little attention in Mozambique at the time, perhaps because it was written in Norwegian.

It said that a Norwegian detective, Kato Stokkan, and Icelandic coastguard commander Einar Valsson, had written a report, commissioned by the Norwegian development aid body, NORAD, and by the Norwegian embassy in Maputo which, largely because of EMATUM, recommended that Norway should reduce its funding for fisheries inspection in Mozambique.

According to “Bistandsaktuelt”, the report stated that there was “a total lack of transparency” about EMATUM, which “makes it impossible to conduct a serious assessment of how the loan of USD 850 million will be allocated, and a loan of that size can have serious consequences for the country’s economic future.”

It noted that, despite the enormous expenditure on EMATUM, other fisheries bills were not being paid on time. One consequence of this, Stokkan told the magazine, was that a fisheries inspection vessel, which was supported by Norway and Iceland, could not go on planned expeditions.

Stokkan and Valsson asked why Norway should use substantial resources to support fisheries inspectorate activities in Mozambique, while the Mozambican authorities were not willing to spend their own resources on fisheries inspection, but set up a company that took out a loan of 850 million dollars.

Stokkan and Valsson regarded both the EMATUM fishing boats and the patrol vessels as “unsuitable”.

They believed that the six patrol boats were “not suitable either to protect the tuna fleet or to patrol the country’s territorial waters”.

As for the fishing boats, the report’s authors did not believe they were suitable for catching tuna since they were not large enough to be at sea for extended periods.

Of course, the assessment by Stokkan and Valsson might have been unfair or inaccurate – but there seems to have been no attempt to respond to these criticisms. If they were right, then Mozambique has spent 850 million dollars on boats that are not fit for their stated purposes

Source: Agencia de Informacao de Mocambique