How did Mozambique manage to hide more than $2b in debts from the IMF?

It’s common knowledge that most developing states have data problems. But even with those priors, the revelation that Mozambique managed to hide more than $2b in undisclosed debts from the IMF for almost three years is cause for pause.

According to the FT:

Details of the previously undisclosed loans — which add about the equivalent of 10 per cent of gross domestic product to the government’s known debt burden — emerged after the “tuna” bond was restructured last month.

Of the two previously undisclosed loans confirmed last week, the first was for $622m to a state-owned company, Proindicus. The second, to another unidentified state company, was valued at more than $500m, a person familiar with the matter said.

Credit Suisse, the Swiss bank, and Russia’s VTB bank, both of which arranged the sale of the tuna bond, provided the undisclosed loans, the IMF said.

Basically Mozambique borrowed a lot of money ostensibly to set up a state-run tuna fishing company but ended up spending nearly all the money on military speed boats.

Borrowing so much money to spend on the military seems like a really REALLY bad idea.

Also, how did the IMF miss this for so long?

Public Finance is hard.

More on this here.