Debts leave Mozambique staring at economic crisis
Mozambique is on the verge of debt crisis that is having serious repercussions on the economy.
Barely a decade after international creditors wrote off over US$6 billion of loans to the country as part of the Heavily Indebted Poor Countries (HIPC) initiative, the country is showing alarming signs of plunging back into unserviceable debt.
The government has disclosed previously hidden, government-guaranteed loans exceeding $1-billion (R14.8-billion) to state defence and security companies.
As a result, the International Monetary Fund (IMF), which had been working with Mozambique to help it repay a previously disclosed debt of $850-million, suspended the second installment of a $282-million loan to the country.
Fourteen others donors and financial agencies who used to give direct support to the Mozambican state budget have also interrupted disbursements until further notice.
A decrease in foreign aid has worsened a large drop in the world market price of some of Mozambique’s key exports and of foreign direct investment.
The result has been a severe shortage of foreign currency, which has seen the Meticals currency lose double its worth to the South African Rand to 4M/R.
The Institute for Security Studies (ISS) said since most food was imported from South Africa, this will increase food inflation.
The security situation is not rosy either with the Mozambican National Resistance rebels embarking on a campaign of terror in the south-north highway between Mozambique and South Africa.
Before its current problems, Mozambique was earmarked for an economic boom following natural gas discoveries.
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