The hidden-debt scandal

In 2016 it emerged that state-owned companies in Mozambique had borrowed more than 2 billion US dollars through government-guaranteed loans that were not disclosed to the IMF, parliament or the public. The IMF and donors suspended support, the exchange rate and inflation spiralled, and the metical, which had been trading around 30 to the dollar, fell to over 70 during 2016 while annual inflation rose above 20 percent late that year. The Banco de Moçambique raised its policy rate sharply, to a peak of 23.25 percent, and the economy slowed from growth of around 7 percent a year to below 4 percent. Cyclone Idai in 2019 and conflict in the north further disrupted growth, and the scandal is the key to understanding the break in Mozambique's output, inflation and exchange-rate charts after 2015.