Campaigners are calling on the UK to prevent vulture funds from using British courts to pursue the debts of poor countries after it emerged that Mozambique could be the first in a wave of states facing a new debt crisis sparked by the commodity price crash.



Mozambique, one of the world’s fastest growing economies for much of the past decade, admitted on Tuesday that its debt levels are unsustainable and that it must restructure repayments if it is to receive further aid from the International Monetary Fund (IMF). Like many poor countries, Mozambique is vulnerable to falling commodity prices and higher interest rates.

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The country’s government revealed in April that it had secretly taken out loans of $1.1bn (£901m) from two London-based banks, Credit Suisse and Russia’s VTB bank. All of its private external debt is now owed under English law, enabling vulture funds and others who have bought the debts cheaply to shun the restructuring process and instead sue Mozambique in UK courts.

VTB said in a statement that its loans were executed in compliance with appropriate polices, and that the government of Mozambique had confirmed it was adhering to internal and external legislation by disclosing comprehensive information to creditors and investors.

“Essentially, the government misled us,” said VTB. “Investors should be protected, debts need to be repaid, and the IMF should be informed about loans in time.”

VTB said it no longer owned a loan extended to state-owned Mozambique Asset Management, the debt having been transferred to other regional investors. The bank added that it was not deserting investors, to whom it remained responsible as creditor and agent on the relevant bonds, and said it would continue to engage in constructive dialogue with Mozambique’s ministry of economy and finance and its advisers.

Credit Suisse declined to comment.

The Jubilee Debt Campaign called on the UK government to extend a 2010 law – currently only applicable to loans granted before 2004 – that protects countries from such actions. Pointing out that 90% of sub-Saharan African government bonds are owed under English law, the pressure group pointed to Ghana and Mozambique as early warning signs of a far greater developing world debt crisis on the horizon.

“To help break this boom-bust cycle of debt crises, the UK needs to legislate that all loans given to governments under English law have to be publicly disclosed at the time the loan is given, so that the UK cannot again be complicit in hiding public debts,” said Jubilee in a statement.

“There is no reason why those who lent at high interest rates to a government whose ability to repay was clearly dependent on continued high commodity prices should be repaid. They took a bet, and it has not come off.”

In its annual report last month, the UN conference on trade and development (Unctad) raised fears of a fresh debt crisis in developing countries that could send shockwaves through the global financial system. The organisation also said the benefits of debt relief provided to some of the world’s poorest countries following mass public campaigns either side of the year 2000 were “fast evaporating”.



Mozambique has pledged to honour what it described as illegal debt contracts to state-owned companies. While acknowledging the attraction of defaulting on some payments, Prime Minister Carlos Agostinho do Rosário told Mozambique’s parliament that the “good image of the country among international creditors” would be hurt if the government failed to make good on guarantees.