World Bank delays aid to country pending debt analysis

April 28, 2016 6:01 AM

"Following the DSA, a decision will be made on the volume of World Bank support to Mozambique."

A man is silhouetted against the logo of the World Bank at the main venue for the International Monetary Fund (IMF) and World Bank annual meeting in Tokyo October 10, 2012.

The World Bank is delaying approval of further development loans to Mozambique pending a debt sustainability analysis to be conducted with the International Monetary Fund, a spokesman said on Wednesday.

The IMF said last week Mozambique had admitted to having more than $1 billion of undisclosed debt and that the two parties were evaluating the implications of the disclosure.

"Processing of investment lending currently continues, while further approval of development policy loans is delayed pending the DSA and the analysis of macro-economic stability by the IMF and the World Bank," the World Bank spokesman said.

Prior to last week's IMF statement, a source at the Fund had told Reuters that Mozambican firm Proindicus, owned by the interior and defence ministries and the state security services, had been lent $504 million by Credit Suisse and $118 million by Russia's VTB.

Another loan of $535 million had gone to Mozambique Asset Management, a state company set up to build a shipyard in the northern city of Pemba, that source said.

Mozambican government spokesman Mouzinho Saide said Maputo had granted a $622 million loan guarantee to Proindicus in 2013, and $535 million to Mozambique Asset Management the following year.

This was meant to protect strategic national infrastructure and help maintain naval equipment, Saide said after a cabinet meeting.

The loans are in addition to an $850 million 'tuna bond' issued in 2013 and restructured last month because the southeast African nation was struggling to meet repayments.

The IMF source said the extra borrowing had pushed Mozambique's foreign debt to $9.64 billion, a level "very close to unsustainability".

Enhance Your Pulse News Experience!

Get rewards worth up to $20 when selected to participate in our exclusive focus group. Your input will help us to make informed decisions that align with your needs and preferences.

I've got feedback!