15 June by Jubilee Debt Campaign
Small-scale traditional fishing boats in Maputo, capital of Mozambique, with the city rising behind (Cordelia Persen / Flickr)
A group of 26 organisations in Mozambique have asserted that the $1.86 billion of the country’s debts at the centre of a growing international controversy were contracted illegally and should not be paid. The campaigners make the claim about three state backed debts owed by MAM ($535 million), ProIndicus ($597 million) and Ematum ($726.5 million). The ProIndicus debt comes from loans from Credit Suisse and VTB Bank, MAM loans from VTB and Ematum a Eurobond.
Under the Mozambique constitution all loans and guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). of longer than a year have to be approved by the Assembly of the Republic, the parliament. This did not happen with any of these three debts. Furthermore, the ProIndicus and MAM debts exceeded limits set by the 2013 Budget Law and were not entered into the State Budget for that year. The Ematum debt was only entered in the State Budget in 2015, despite it being contracted in 2013.
All of the debts are believed to have been contracted under English law, through the London-based offices of Credit Suisse and VTB Bank. It has been reported that the UK’s Financial Conduct Authority is investigating whether Credit Suisse and VTB broke disclosure rules by failing to reveal the ProIndicus and MAM debts.
Paula Monjane from the Fórum de Monitoria do Orçamento (Civil Society Budget Monitoring Forum) said:
“The officials who broke the law in Mozambique need to be held accountable by the Administrative Court and the Central Office for Combating Corruption. This includes the lenders and financial institutions which facilitated these loans. In defence of the common good and against the continued impoverishment of the Mozambican people, we do not want, do not accept and will not pay the debts of EMATUM, ProIndicus and MAM.”
The full statement of the 26 civil society organisations integrating the Budget Monitoring Forum (FMO), Mozambique Debt Group (GMD) and Transparency and Fiscal Justice Coalition (CTJF) is available here.
Sarah-Jayne Clifton, Director of the Jubilee Debt Campaign in the UK said:
“This is yet another example of private lenders and governments colluding together to hide new loans from public and parliamentary scrutiny. Lenders and borrowers are both responsible for ensuring that loans are contracted legally and democratically and invested productively so that they don’t saddle populations with unjust and unpayable debts. Yet time and again we are seeing irresponsible lenders being bailed out and the populations of countries paying the price. This should not be the case in Mozambique. Credit Suisse and VTB should pay the price for these illegitimate loans, and should not be bailed out by the IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.
When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.
As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).
The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
http://imf.org or anyone else.
“The UK’s major role in the broken global debt system also needs to be addressed. The UK government should consider new legislation to ensure that all public and publicly-guaranteed loans issued under English law are disclosed to the people of the country concerned.”
The revelations about the debts have led to the IMF and World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.
It consists of several closely associated institutions, among which :
1. The International Bank for Reconstruction and Development (IBRD, 180 members in 1997), which provides loans in productive sectors such as farming or energy ;
2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;
3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.
As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.
http://worldbank.org suspending loans which were being used to make debt payments. A $178 million debt and interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payment owed by MAM has been defaulted on by the company with VTB currently trying to recover the money from the Mozambique government.
It is believed that part of the MAM, ProIndicus and Ematum loans were used to buy military equipment, particularly interceptor boats and accompanying infrastructure. Campaigners in Mozambique are calling for a forensic audit to find out exactly how much was spent, and also where the rest of the money went.
The 26 organisations from Mozambique are: Centre for Civil Society Learning and Capacity-Building (CESC); Mozambican Debt Group (GMD); N’weti – Communication for Health; Centre for Public Integrity (CIP); Community Development Foundation (FDC); ActionAid Mozambique (AAMoz); Rural Observatory (OMR); Mozambique NGO’s League (JOINT); Civil Society Forum for Children’s Rights (ROSC); Community Radios Forum (FORCOM); Helvetas Swiss Intercooperation; Muleide – Women, Law and Development; Mozambican Civil Society Platform for Social Protection (PSCM-PS); WLSA – Women and Law in Southern Africa; Associação Progresso; Kulima; TEA; Fórum Mulher; Rede Activa; Rural Women’s Association; Mozambique Workers Organization (OTM – Trade Union); CENTME; SENTIHOT; SINECE; The Oppressed Theatre Group; Open Society (OS); The Christian Council of Mozambique (Branches of Maputo, Gaza, Inhambane and Cabo Delgado); Association for Women Empowerment and Development; The Basic Education Development Unit – Laboratory.
Clause p) of paragraph 2 of article 179 of the Constitution of the Republic of Mozambique says it is the exclusive competence of the Assembly of the Republic to “authorize the Government, defining the general conditions, to contract or grant loans, perform other credit operations, for a period longer than a fiscal year and to set the maximum limit of guarantees to be granted by the State”.
Source: Jubilee Debt Campaign
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