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10/12/2016

EU among donor groups suspending aid to Mozambique over hidden debt

Development Policy

EU among donor groups suspending aid to Mozambique over hidden debt

An Oxfam water project in Mozambique.

[Oxfam/Flickr]

Donor nations and institutions including the EU that contribute to Mozambique’s state budget have suspended their support over revelations of $1.4 billion in hidden debt, officials said Wednesday (4 May).

Portuguese President Marcelo Rebelo de Sousa, representing the donors, announced the move at a press conference in Maputo alongside Mozambican President Filipe Nyusi.

De Sousa said it was a “temporary suspension” and not a “final judgement” on the direct contribution to the state budget, estimated at $265 million this year.

The donor group has 14 members including France, Britain, Canada, the European Union and the African Development Bank.

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Mozambique has admitted hiding the debt, which was used to fund maritime security vessels and defence equipment.

The International Monetary Fund (IMF) said last month it had suspended aid “pending a full disclosure and assessment of the facts.”

The World Bank and Britain have already frozen funds to Mozambique, which relies heavily on foreign donor money.

“The consequences are very serious for the state, which will have to make cuts in several sectors,” Mozambican economist Joao Mosca told AFP.

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One of the ten poorest countries in the world according to the IMF, Mozambique has been hit hard by falling commodity prices.

The government said tensions with the Renamo opposition group, which waged a 16-year civil war that ended in 1992, were behind its decision to hide the debt.

Clashes between government forces and Renamo have increased since February, with attacks reported almost daily and key roads often closed due to the unrest.