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UK joins IMF and World Bank to cut Mozambique aid | UK joins IMF and World Bank to cut Mozambique aid |
(about 1 hour later) | |
The UK government says it has suspended financial aid to Mozambique over an alleged "serious breach of trust" relating to undisclosed debts. | The UK government says it has suspended financial aid to Mozambique over an alleged "serious breach of trust" relating to undisclosed debts. |
This follows similar action from the International Monetary Fund (IMF) and the World Bank. | This follows similar action from the International Monetary Fund (IMF) and the World Bank. |
The IMF halted funding 10 days ago when it found Mozambique had not declared debts of more than $1bn (£700m). | The IMF halted funding 10 days ago when it found Mozambique had not declared debts of more than $1bn (£700m). |
The government says the liabilities relate to guaranteeing loans taken out by two mostly state-owned companies. | The government says the liabilities relate to guaranteeing loans taken out by two mostly state-owned companies. |
The UK said in a statement that it was now "working closely with other international partners to establish the truth and coordinate an appropriate response". | The UK said in a statement that it was now "working closely with other international partners to establish the truth and coordinate an appropriate response". |
Africa Live: More on this and other news stories | Africa Live: More on this and other news stories |
The IMF is currently carrying out an analysis to see if Mozambique has a sustainable level of debt, and the World Bank is waiting for its outcome before it approves any more loans. | The IMF is currently carrying out an analysis to see if Mozambique has a sustainable level of debt, and the World Bank is waiting for its outcome before it approves any more loans. |
Mozambique's Prime Minister Carlos Agostinho do Rosario went to the IMF headquarters in Washington DC last week to explain the government's position. | Mozambique's Prime Minister Carlos Agostinho do Rosario went to the IMF headquarters in Washington DC last week to explain the government's position. |
The government has admitted that it acted as guarantor for a $622m loan taken out by state-owned Pro-Indicus, and another loan of $535m by Mozambique Asset Management. Both are involved in the maritime industry. | The government has admitted that it acted as guarantor for a $622m loan taken out by state-owned Pro-Indicus, and another loan of $535m by Mozambique Asset Management. Both are involved in the maritime industry. |
Mozambique has had one of Africa's fastest growing economies in recent years with oil and gas discoveries buoying its prospects and attracting a lot of investment. | |
Analysis - Matthew Davies, editor, BBC Africa Business Report | Analysis - Matthew Davies, editor, BBC Africa Business Report |
The mechanics of this are the same as with a personal loan. | The mechanics of this are the same as with a personal loan. |
If you take out a loan from a bank, the bank always asks you about your other liabilities. Do you have other debts? It will also want to see a payslip. | If you take out a loan from a bank, the bank always asks you about your other liabilities. Do you have other debts? It will also want to see a payslip. |
From the bank's point of view, it is all to do with risk. Can you make the payments on their loan, if you have a lot of other debt as well? | From the bank's point of view, it is all to do with risk. Can you make the payments on their loan, if you have a lot of other debt as well? |
And it is the same with countries. So, when the IMF lent money to Mozambique, it would have asked about the country's other liabilities. | And it is the same with countries. So, when the IMF lent money to Mozambique, it would have asked about the country's other liabilities. |
As the Mozambique government failed to disclose that it guaranteed the two large loans, it has put the IMF loan in jeopardy. | As the Mozambique government failed to disclose that it guaranteed the two large loans, it has put the IMF loan in jeopardy. |
The IMF is now worried that Mozambique will not be able to meet its liability commitments with this extra debt on its books. | The IMF is now worried that Mozambique will not be able to meet its liability commitments with this extra debt on its books. |