Mozambique: impact of Cyclone Idai boosts case for non-repayment of secret loans, says UN rights expert

4 April by Juan Pablo Bohoslavsky


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GENEVA (29 March 2019) – “The realisation of economic, social and cultural rights in Mozambique should not be jeopardised by the servicing of the country’s debt and in particular its ‘secret loan’ component. Human rights and devastating impacts of Cyclone Idai must imperatively be considered in debt discussions,” says UN human rights expert Juan Pablo Bohoslavsky.

I am extremely concerned about the impact of the disaster on human rights both in the short and long term. Human rights must be at the centre of efforts to deal with the cyclone’s consequences: the disaster should not deepen the debt crisis while debt repayments should not limit the necessary fiscal space for adequate response,” said the Independent Expert on foreign debt and human rights.

In 2013 and 2014, undisclosed Government-guaranteed loans, reportedly totalling US$ 2bn, were received by State-owned entities in Mozambique, without parliamentary approval and exceeding official public limits. Investigation and judicial proceedings are ongoing, and both debt restructuring and cancellation are being considered.

In 2016, a Parliamentary Commission of Inquiry concluded that the 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). were illegal and unconstitutional, as in violation of the budget law. An audit also established that the process for providing the guarantees appeared to have been inadequate while also identifying potential conflict of 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. ,” the Expert explained.

Following the disclosure of the loans in 2016, the International Monetary Fund 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
(IMF) and a number of creditors suspended their financial support for Mozambique. Public debt was heightened. The IMF recently stressed that Mozambique needs to achieve significant debt relief.

“The principle of debt sustainability goes way beyond economic considerations: it includes a more comprehensive understanding of sustainability including respect for human rights and environmental issues,” Bohoslavsky said.

I urge Mozambique and its creditors, including the IMF, to conduct a human rights impact assessment of debt strategies, potential debt relief programmes and restructuring, as well as of economic reforms recommended, such as further fiscal consolidation ” he said, highlighting the Guiding Principles on human rights impact assessments for economic reform policies.

The impact of debt servicing on the realisation of human rights, and core values of transparency, public participation and accountability, must be considered in borrowing decisions.

Lenders have a duty to ensure that government officials are authorised under domestic law to enter into such agreements. In an open letter to the Thun Group of Banks, I questioned the role of private financial institutions in evaluating lending risks linked to the lack of transparency, underlining important lacuna in discussions on human rights due diligence”.

loans allegedly taken out against rules aimed at ending corruption could be considered as void; and they should simply not be repaid

While sovereign debt Sovereign debt Government debts or debts guaranteed by the government. contracts are binding obligations, exceptions do exist. Allegations of bribes and corruption that emerged when the secret loans came to light should be considered. In this context, loans allegedly taken out against rules aimed at ending corruption could be considered as void; and they should simply not be repaid .”

Illicit financial flows are important concerns as they drain a significant portion of public resources and impact debt repayment. Combating bribery and corruption is essential to making greater progress in realising international human rights obligations. I thus strongly encourage the Government to step up ongoing efforts and ensure independent investigation of alleged corruption cases in Mozambique

In short, the secret loans should not and cannot be repaid,” the Expert concluded.

The issue was brought to the attention of the Government, the IMF and Mozambique’s private creditors Credit Suisse and VTB in 2016.

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Note: An unofficial translation of the Guiding principles on human rights impact assessment in Portuguese is now available.

Mr. Juan Pablo Bohoslavsky (Argentina) was appointed as Independent Expert on the effects of foreign debt and human rights by the United Nations Human Rights Council on 8 May 2014. He has previously worked as a Sovereign Debt Expert for the United Nations Conference on Trade and Development UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

(UNCTAD) where he coordinated an Expert Group on Responsible Sovereign Lending and Borrowing. He is independent of any government or organization and serves in his individual capacity.

Follow the Independent Expert’s work on Twitter at: @IEfinanceHRs

The Independent Experts are part of what is known as the Special Procedures of the Human Rights Council. Special Procedures, the largest body of independent experts in the UN Human Rights system, is the general name of the Council’s independent fact-finding and monitoring mechanisms that address either specific country situations or thematic issues in all parts of the world. Special Procedures experts work on a voluntary basis; they are not UN staff and do not receive a salary for their work. They are independent from any government or organization and serve in their individual capacity.

UN Human Rights, country page – Mozambique

For further information and media requests, please contact: Ms Frédérique Bourque (+41 22 917 9946 / fbourque@ohchr.org or Ms. Junko Tadaki (+41 22 917 9298 /jtadaki@ohchr.org) )

For media inquiries related to other UN independent experts please contact Mr. Jeremy Laurence, UN Human Rights – Media Unit (+41 22 917 9383) jlaurence@ohchr.org

Follow news related to the UN’s independent human rights experts on Twitter @UN_SPExperts.

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Source: https://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=24425&LangID=E



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Juan Pablo Bohoslavsky

Independent Expert on the effects of foreign debt and other related financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights

Other articles in English by Juan Pablo Bohoslavsky (11)

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