Mozambique court annuls $1.4bn government debt

Mozambique’s Constitutional Court has annulled $1.4bn in loans taken out by state-owned security companies from foreign banks.

This means the country is no long obligated to pay the money back. 

The court ruled that the government had acted outside of its jurisdiction by backing the loans.

“The government acted outside the constitution, violating unequivocally the article that reserves the exclusive right of parliament to authorise to make or grant loans,” a judge ruled. 

Mozambique’s economy has been in turmoil since 2016, when it emerged the country owed more than $2bn in undisclosed state debts. 

The annulled loans were borrowed from London branches of the Swiss bank Credit Suisse and Russia’s VTB between 2013 and 2014. Upon their discovery in 2016, Mozambique experienced a currency collapse and defaulted on its sovereign debts. 

The lenders had argued in court that the government was liable for the money as the guarantor of the loans, but civil society organisations, which brought the case, said the country was not obligated to pay them back. 

The loans were taken out to finance a large tuna factory and maritime security project. However, hundreds of millions of dollars went missing and the projects were never completed. 

The United States has alleged that at least $200m was spent on bribes. 

Mozambique’s former Finance Minister Manuel Chang has been held in South Africa since December 2018 over allegations that he accepted millions in kickbacks. 

Mr Chang has denied any wrongdoing and has requested to be extradited to Mozambique rather than the US. 

Mozambique’s Constitutional Court made a similar annulment ruling last year, cancelling a $850m Eurobond issued by another state company, Ematum.

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