F or much of the past decade, Mozambique has been an African success story, with one of the world’s fastest growing economies. However, it is now in the throes of a debt crisis, with money owed now reaching levels that are more than double annual GDP. Consequently, last week, the government in Maputo announced that they would be forced to seek to restructure payments and request aid from IMF.
High commodity prices through the early and mid 2000s meant that many were happy to lend to resource rich Mozambique, but as these prices have fallen since 2014, Mozambique has been unable to keep up, and the value of its currency has crashed. The Jubilee Debt Campaign (JDC) says the “immediate trigger” of the crisis was loans made “irresponsibly” in April by Credit Suisse and VTB, which were not sanctioned by Mozambique’s Parliament. These loans were made in secret, and their revelation has led to the IMF and the World Bank ceasing lending.The JDC warns that Mozambique is not the only African nation facing economic problems due to falling commodity prices, and point to similar situations emerging in Zambia and Ghana.
Across the border in Zimbabwe, things are looking little better. There, they are experiencing a vast cash shortage, with banks running low on US dollars, the de facto currency. The situation is being made worse as people rush to withdraw their savings. This has prompted Robert Mugabe’s government to introduce a new currency, called “bond notes”. These notes will, in theory, have their value tied to American dollars, but many observers fail to see how this is different from the government simply printing money. Having experienced periods of massive hyperinflation before, this seems like it might be the start of a recurring nightmare for many Zimbabweans.