Mozambique’s Constitutional Council has declared the fraud involving two billion dollars in loans to state-owned companies, as illegal.
“The constitutional council declares the nullity of the acts inherent to the loan contracted by Ematum SA, and the respective sovereign guarantee granted by the government in 2013, with all legal consequences,” the Constitutional Council ruled in a declaration published on Tuesday, 4 June 2019.
It is a ruling that all three of the loans in the two billion dollars secret loan package are null and void and that the government guarantees are illegal.
The Mozambican government admitted in 2016 to undisclosed lending, prompting the International Monetary Fund and foreign donors to cut off support, triggering a currency collapse and a default on the country’s sovereign debt.
Mozambique is still struggling to overcome the resultant debt crisis and the ruling comes at a time the government is attempting to negotiate a new deal with the Ematum bondholders, but this will force the whole matter to be reconsidered.
The constitutional council case was brought by the civil society coalition the Budget Monitoring Forum (Forum de Monitoria do Orçamento – FMO) which has taken the lead in the campaign against the secret debt.
Former Mozambique finance minister Manuel Chang, 63, is in a South African jail awaiting extradition after was arrested in at the Johannesburg air in December on his way to Dubai as part of the same case and has denied wrongdoing.
So far, Mozambique’s Attorney General’s Office has indicted 18 people for their involvement in fraud involving two billion dollars in loans to state-owned companies, in a scandal that has ensnared two major international banks, namely Credit Suisse and Russia’s VTB Capital, lead arrangers for the loans which were allegedly paid a total of 199.7 million dollars in fees.