Country reviews aid to Mozambique over hidden debt

May 11, 2016 6:33 AM

"The United States joins other donors in the review of assistance to Mozambique," the US embassy in Mozambique said in a statement released on Monday.

Fishing boats sit beneath the skyline of Mozambique's capital Maputo, April 15, 2016. Picture taken April 15, 2016.

The U.S. government is reviewing the $400 million in aid it provides to Mozambique annually after the cash-strapped southern African nation admitted to having more than $1 billion of undisclosed debt.

The United States is the biggest bilateral donor to Mozambique, with a focus on health, agriculture and education.

The southern African nation has been seen as an African success story that recorded blistering rates of economic growth before the downturn in commodity prices, which has derailed development of coal fields and stalled offshore gas projects.

"The United States joins other donors in the review of assistance to Mozambique," the U.S. embassy in Mozambique said in a statement released on Monday.

Mozambique's admission of hidden debt to the International Monetary Fund (IMF) in April has hit cash inflows, with the World Bank delaying approval of development loans and rating agency Moody's saying the situation was a "credit negative".

"We appreciate the initial steps taken by senior government officials to clarify the debt situation. These are the first important steps to restore confidence," the U.S. embassy said.

"But the government must now act quickly to account for these loans and how the funds were used, as well as outlining a plan to mitigate its impact on the economy of Mozambique."

The embassy said a group of donor nations known as the G14 has also suspended general budget support to Mozambique.