Overseas loans

Real concerns have been raised about several loans to Mozambique from two London-based banks. A recent audit of the loans raises a number of questions, including a lack of evidence that they had been used for their stated purposes. While the loans were given government guarantees by senior officials of the Mozambique government, they were not approved by the Mozambique parliament. Campaigners in Mozambique argue that the loans therefore violate the country’s constitution and are calling for the current government of Mozambique to repudiate the loans.

However, I understand that the Mozambique loans are owed under UK law. This means that any legal dispute about their payment would be heard in London courts. According to the Jubilee Debt Campaign over 90 per cent of debts from private lenders to governments in sub-Saharan Africa are also owed under UK law. This makes this an important issue for the UK more widely.

The Debt Relief (Developing Countries) Act 2010 limits the amount that so-called ‘vulture funds’ – institutions that buy developing countries’ sovereign debt at discounted prices and then seek to recover its full value through legal action – can recover from countries designated as having unsustainable external debts.

However, the government should consider strengthening the Act to ensure that vulture funds cannot ignore agreed debt restructuring in pursuit of large profits in UK courts. I will continue to follow this issue closely.