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“Debt Crisis in Mozambique”: Development Needs Debt Relief


Date: 24 January 2019 | Organisation: | Theme: debt | Author: Holger Lauinger

In cooperation with the Rosa Luxemburg Foundation and the debt relief alliance Jubilee Germany (erlassjahr.de), SODI organised a panel discussion on the “Debt Crisis in Mozambique” and the question of the possibilities for shaping international solidarity.

Mozambique – an Example of the Debt Crisis

“The situation was already very bad for the small farmers before the current debt scandal, but now it is even worse. The purchasing power of smallholder family businesses for seeds, fertilisers and crop protection has sharply declined. In addition, we have lost international support,” says Felisiberto Baûque, an agricultural engineer from Boane, when asked about the situation in the rural areas of Mozambique. “Currently we are not receiving any government support for education, health or water supply, and the government has also withdrawn the daily bread subsidy,” agrees Gina dos Reis from the NGO Grupo Moçambicano da Divida. “The IMF estimated the country’s debt to GDP ratio at 170 percent before the debt scandal. That was of a magnitude comparable to the situation in Greece. Now, a debt ratio of 278 percent is forecast for the year 2022. This is an enormous amount of foreign debt for Mozambique,” says Kristina Rehbein, an expert from the debt relief alliance Jubilee Germany. “There aresome corrupt elites responsible for the hidden debt scandal, but hidden debt has also surfaced in other countries as well such as, for example, the Congo and Malaysia. It is not a problem specific to Mozambique. It is much more about discussing the sustainability of debt in critically indebted developing countries. In Africa, 40 percent of governments are currently critically indebted,” she adds to her first remarks.

An animated discussion between podium and guests

Some 50 people had come to the cafeteria in the new building of the daily newspaper ‘taz’ to discuss the dramatic debt situation in Mozambique and the countries of the Global South with the experts. “The information from the international press about the debt situation in Mozambique in recent years reads like a global business crime,” noted Daniel Pelz, Deutsche Welle’s Africa Correspondent, as he introduced the complex discussion that were to follow. It combined aspects of assessing the country-specific situation of Mozambique with an overarching comparative analysis of global debt developments. The speakers dealt throughout with issues ranging from lifesaving social services to “illegitimate debts” to the necessity of an international insolvency mechanism. The following morning, the Deutsche Welle’s Portuguese channel had already broadcast a report of the event titled “Mocambique deve pagar ou nao as dividas ocultas?” (“Should Mozambique pay their hidden debts or not?”). So, what had happened in Mozambique and which options for action did the speakers offer from their respective perspectives?

Individual Initiatives and National Obligations in the Debt Crisis

Mozambique has had a negative current account since it became independent in 1975. It is one of the poorest countries in the world, but at the same time rich in raw materials. In 2000 and 2005, the HIPC and MDRI debt relief initiatives cut debt by 6.3 billion US dollars. Subsequently, until 2010, debt rose only slowly again in relation to economic output. In early 2016, however, it became known that the government, bypassing the parliament, had guaranteed loans from parastatal organisations to the tune of approximately 2 billion US dollars. These loans had been used predominantly for the procurement of military and dual-use goods. Mozambique has been in partial default since the beginning of 2017.

Gina dos Reis demands that these “illegitimate debts” be cancelled. The loans were guaranteed by the Mozambican government without public knowledge, but to conform with the law they had to be publicly approved by the Mozambican parliament.

To underscore the dimension of her claim, she explained: “The illegitimate debts accounts for 15 percent of public debt but the interest on this illegitimate debt accounts for 60 percent of government debt.” Those responsible for the scandal would, she says, have to be prosecuted. She comments on the situation looking at international responsibility: “They give us loans. They take the raw materials. They do not give us a chance to produce anything. They pay no taxes. But we, the people, pay taxes.”

Kristina Rehbein points to a constructive proposal for dealing with the debt crisis. The estimated debt service payments would go not to the creditors, but into a development fund for projects in Mozambique. This would strengthen the social and economic situation of the country.H

For the full report (in German) on the page of SODI e.V.

2019-01-24T12:19:43+00:00 24 January 2019|debt|

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