‘Don’t pay’: Mozambique court frees government from Ksh149 billion foreign debt

Mozambique's Constitutional Court has annulled $1.4 billion (Ksh149 billion) worth of loans borrowed from foreign banks by state-owned security companies.

This means the country is not obliged to pay them back.

Mozambique's economy has been in crisis since 2016, when it emerged the country had more than $2 billion (Ksh213 billion) of undisclosed state debts.

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

The loans, borrowed from London branches of Swiss banking giant Credit Suisse and Russia's VTB between 2013 and 2014, triggered a currency collapse and sovereign debt default when they were revealed in 2016.

The lenders had argued in court that documents showed the government was liable for the money.

The Mozambican government stood as guarantor of the loans, but civil society organisations, which brought the case, argued the country was not obliged to pay them back.

The loans were to finance a large tuna factory and maritime security project. But hundreds of millions of dollars went missing and the supposed benefits never materialised.

The US alleged that at least $200 million (Ksh21.3 million) was spent on bribes.

Mozambique's former Finance Minister Manuel Chang has been held in South Africa since December 2018 over accusations he pocketed millions in kickbacks.

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

The Constitutional Court made a similar ruling last year on a $850m Eurobond issued by another state company, Ematum.

The southern African country is among the world’s poorest but has massive offshore natural gas deposits that could turn it into the world's fourth largest producer and potential for a huge energy economy.