The New Debt Crisis: Structural adjustment, loans, corruption and profits – the case of Mozambique
A new debt crisis is looming and threatens to force African governments to surrender their sovereignty to international financial institutions and to accept structural adjustment programmes that impose reductions in their social spending. Two factors are held responsible for this new surge of indebtedness after the partial debt cancellation of 2000 (HIPC Initiative): 1) the sharp fall of commodity prices after the 2008 crisis and 2) the massive flow of capital to high-interest countries in the South—against the background of low interest levels in the North. In this context, loans are offered without due diligence against the promises of prospective gains from the extractive industry. In many cases, loans are contracted in order to construct infrastructural projects in connection with the extractive industry. African governments received USD32.8 billion in loans in 2015 but paid USD18 billion in debt interest and principal payments in the same year.
A case in point are the loans amounting to more than USD2 billion given to three Mozambican shell companies by the banks Credit Suisse and the Russian VTB. These loans were secretly granted against a government guarantee without the Parliament’s knowledge. They entail serious consequences for the country as a whole and the poor in particular, such as inflation, exchange rate losses, loss of trust and aid from donor countries, downrating as a debtor (implying even higher interest rates), budget cuts for social services, health and education, decline of democracy and increased corruption levels.
The objective of the conference is to understand the mechanisms of indebtedness and how the latter curtails the policy-making capacity of indebted countries, increases poverty and inequality and prevents true development. Perspectives for political activities shall be explored in a conversation between experts, activists and politicians from Europe and Mozambique in order to counter the above mechanisms of indebtedness. As the legal seat of Credit Suisse and as one of the donor countries, Switzerland is called to critically reflect her role and to tackle the problem.