A chaotic day for Mozambique’s economy yesterday saw the IMF suspend co-operation with the country over $1 billion in previously undisclosed borrowing, and ended with a $3 billion discrepancy between the finance minister and his spokesman’s estimates of the level of the country’s public debt. Meanwhile, the world’s major credit ratings agencies made conflicting statements on whether or not the country has already defaulted.

Mozambique’s ruling party, Frelimo, is today wrapping up its annual conference in Matola but looks increasingly unlikely to make a statement this evening on a crisis that has been building since the government announced its intention in mid-March to restructure the $850 million EMATUM bonds, borrowed in 2013 to fund a combination of fishing and defence boats.

For a timeline of the events of the past month – including a detailed breakdown of yesterday’s happenings – scroll to the end of the article.

Late yesterday afternoon, Mozambique time, the IMF’s Africa director told a press conference in Washington that Mozambique’s government had admitted to more than $1 billion in hidden borrowing from Credit Suisse and VTB Bank – apparently contradicting statements made earlier in the day by finance minister Adriano Maleiane who, according to Portuguese news agency Lusa, said there was no hidden borrowing.

Maleiane did confess to some confusion around the borrowing, but said the two loans – referring to EMATUM and the recently revealed ProIndicus – formed part of Mozambique’s $11 billion public debt that it had already disclosed.

At almost exactly the same time, ratings agency Standard & Poor’s changed Mozambique’s rating for the third time in a month – upgrading the country to ‘B-/B’, where it stood before it undertook a restructure of the remaining $700 million EMATUM bonds. S&P did not explain why it reversed a decision it made on 1 April – once the restructure offer had already been accepted – that the restructure constituted a default.

On the 8 o’clock news that evening on independent television channel STV, Maleiane’s spokesman Rogério Nkomo told the country that public debt stands at around $8 billion – closer to the estimates previously made public by the government, but $3 billion less than what his boss had said that day in Washington. The discrepancy has yet to be explained, but provides clues as to where the final total of hidden borrowing might end up.

Late in the evening, newsletter Africa Confidential published its take on what it described as “the financial and fiscal farrago”, saying that according to their sources, the IMF “has been so appalled by the apparent recklessness of the lending policy of the banks, that it may possibly smile on Mozambique defaulting on a significant proportion of the debt.”

IMF Africa director Antoinette Sayeh said yesterday that the new revelations “significantly changes our assessment of Mozambique’s macroeconomic outlook”, adding that Mozambique’s other international partners “are eager also to understand and appreciate the macroeconomic impact of this considerable volume of debt, and how that impacts their ability to continue to provide their planned financing to Mozambique.”

The last word yesterday came from ratings agency Moody’s, which took the opposite position from its main rival, S&P – saying it had now decided that the EMATUM swap did constitute a default. However, it did not give the country a default rating, putting it at Caa1, equivalent to S&P’s CC that was in force from 15 March to 1 April.

Neither agency has yet made any statement on what the ProIndicus revelations will do to their analysis.

A month of revelations:

• 15 March: Standard & Poor’s downgrades Mozambique’s sovereign rating to CC as the country announces an exchange offer for EMATUM bonds
• 29 March: Zitamar reports that the S&P downgrade has forced Credit Suisse and VTB, the banks running the restructure, to reveal $787 million in previously undisclosed borrowing by Mozambique’s government
• 1 April: S&P says the EMATUM debt swap is a default, as it was “distressed, rather than purely opportunistic”
• 3 April: Wall Street Journal reports that the previously undisclosed borrowing was for defence spending through ProIndicus, a company previously believed to be part of EMATUM
• 8 April: Zitamar reports the government has admitted to the international community that it borrowed hundreds of millions of dollars through ProIndicus, additional to EMATUM

15 April
Times are approximate, and Mozambique time

• Mid-afternoon: Finance minister Adriano Maleiane tells Lusa there is no hidden debt; puts total public debt at $11 billion
• 17:00: IMF press conference says Maleiane has admitted to more than $1 billion in “previously undisclosed” debt; cancels scheduled visit to Mozambique next week
• 17:40: S&P upgrades Mozambique from previous default judgement
• 20:00: Finance ministry spokesman Rogério Nkomo tells television news that public debt is “around $8 billion” – a discrepancy of $3 billion versus Maleiane’s statement earlier in the day
• 00:28: Africa Confidential says IMF is considering letting Mozambique default
• Overnight: Moody’s downgrades Mozambique, saying the EMATUM swap was a default – but doesn’t give the country a default rating

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