IMF Halts Mozambique Lending -- WSJ
April 16 2016 - 3:05AM
Dow Jones News
By Julie Wernau
WASHINGTON -- The International Monetary Fund said on Friday it
has suspended lending to Mozambique after determining that the
African country had violated terms of its borrowing arrangement
with the IMF by failing to disclose more than $1 billion in other
loans.
The IMF said it had stopped a $55 million loan disbursement to
Mozambique after it became aware of the unreported loans made by
Credit Suisse Group AG and VTB Group of Russia.
The IMF approved in December a $283 million rescue loan package
for Mozambique. The agreement with the IMF requires the southern
African country to fully disclose all borrowings and to meet
regularly with the multilateral agency to provide updates on its
progress.
A Credit Suisse spokesman declined to comment. VTB and
Mozambique officials couldn't be immediately reached to
comment.
The IMF's announcement could cause some investors to steer clear
of the country. Many rely heavily on information from the IMF when
deciding whether or not to invest in developing countries such as
Mozambique.
Antoinette Sayeh, director of the IMF's Africa department, said
the organization investigated Mozambique's borrowing after an April
3 report in The Wall Street Journal, which detailed how Mozambique
borrowed hundreds of millions of dollars through previously
undisclosed loans from the banks.
The report revealed that investors who voted last month to
exchange existing bonds due 2020 for longer-term bonds weren't told
about the additional borrowing at the time of the vote. The price
of Mozambique's new 10.5% bonds due 2023 fell to 87.50 cents on the
dollar from 90.50 cents on the dollar after the IMF announced the
loan suspension, an investor said.
"The undisclosed borrowing exceeds $1 billion and significantly
changes our assessment of Mozambique's macroeconomic outlook," Ms.
Sayeh said in Washington, D.C., at a Friday news conference for the
IMF's spring meetings. "We are currently ascertaining in
cooperation with the authorities, the facts regarding this
borrowing."
IMF Managing Director Christine Lagarde said at the meetings
Thursday that if the agency learns of corruption, it stops
lending.
"We want this hanky-panky business to go away," Ms. Lagarde
said.
The loans made by Credit Suisse and other lenders starting in
2013 materially affect the value of Mozambique's bonds, investors
say. The undisclosed debt, in addition to the $850 million in bonds
sold in 2013 for tuna fishing that was largely also used for
military spending, represent a significant addition to the $6
billion in national debt reported at the end of 2012.
Investors said they wouldn't have purchased the bonds in the
first place if they had known about the additional loans, which
also were used for military equipment.
Following a December report from Mozambique, the IMF said it had
immediately made a $117.9 million disbursement to stabilize the
country, augment its reserves and help reduce poverty.
The IMF cited debt management among its chief concerns in
Mozambique.
"A vigorous debt management strategy will be crucial to address
the challenges of significant infrastructure gaps at a time when
debt vulnerabilities have been rising," the IMF said in its
report.
--Matt Wirz contributed to this article
Write to Julie Wernau at Julie.Wernau@wsj.com
(END) Dow Jones Newswires
April 16, 2016 02:50 ET (06:50 GMT)
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