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29 March 2019updated 08 Sep 2021 10:12am

Mozambique is struggling to cope with Cyclone Idai, and UK-based banks are partly to blame

Banks loaned £1.5bn to Mozambique, helping trigger an economic crisis. Now, the country’s debt could thwart reconstruction in the wake of Cyclone Idai. 

By Dan Carden

The scenes of utter devastation caused by Cyclone Idai as it tore through Mozambique, Malawi and Zimbabwe last week were painful. We still do not know the full extent of the disaster, but it is clear that hundreds of thousands, if not millions, of people have lost homes, lives and livelihoods.

With so many displaced, the humanitarian needs are immense. The government’s £22m response to the relief effort was a welcome step, and people will continue giving generously to the Disasters Emergency Committee’s appeal. People are still being rescued and disease outbreaks are now a major worry. It is right that efforts remain focused on doing all we can to save lives in the days and weeks to come.

But as the water levels begin to recede, we must also think about how to prevent similar disasters striking again, and what action we can take to ensure people affected by Idai can put their lives back together.

Images broadcast across the world of people in Mozambique trapped on rooftops as water levels rose around them depicted the irony of climate change: those least responsible for causing it are those who will be most affected.

Scientists are still working to determine the role that rising temperatures played in Cyclone Idai, but what we do know for certain is that climate change increases extreme weather events. Idai should be a stark wake-up call for governments across the world to deliver on the targets set out in the Paris Agreement and keep global warming below 1.5°C.

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We know that climate change exacerbated the impact of the cyclone. UN special representative for Disaster Risk Reduction, Mami Mizutori said the cyclone is a “clear demonstration of the exposure and vulnerability of many low-lying cities and towns to sea-level rise as the impact of climate change continues to influence and disrupt normal weather patterns.”

But as millions are donated to the relief and recovery effort in Mozambique, London-based banks have pushed $2bn (£1.5bn) of debt on the country’s people.

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In 2013 the London branches of Credit Suisse and VTB gave $2bn to three state-owned companies in Mozambique. None of the loans were agreed by the Mozambique parliament, making them theoretically illegal in the country, and two were kept secret.

When the loans were publicly revealed in 2016, it triggered an economic crisis in Mozambique. Inflation rose to 20 per cent. The World Bank said food price rises caused rural poverty to rise from 55 to 63 per cent, and Jubilee Debt Campaign has calculated that public spending per person in Mozambique fell by 30 per cent during the crisis.

We cannot know whether Mozambique would have been better equipped to cope with the cyclone had it not been for its debt and economic crisis. But it would certainly be in a better position to rebuild in the wake of Idai.

The Labour Party recently asked the UK government if it would look into these loans. The government’s subsequent announcement in parliament that there will be a UK investigation into the role that London-based banks played in Mozambique’s economic crisis was a welcome step. But a monumental disaster should not be needed to prompt the UK government to finally act.

As people in Mozambique look to rebuild their lives, campaigners in the country are clear that ordinary Mozambicans should not have to pay one penny on a debt that they had no say over and derive no benefit from. 

The situation in Mozambique is indicative of the emerging debt crisis across developing countries. Among 68 countries that the IMF assessed for debt risks, it found 32 are now in debt distress or at high risk – up from 15 in 2013. The UK has played a central role in this debt; 90 per cent of publicly disclosed loans to African governments were owed under UK law.  

As the effects of climate change are felt across the world, we must ensure that those countries that bear the brunt of its damage but are least able to cope are not left more indebted. Assistance given to Mozambique, Malawi and Zimbabwe should take the form of grants rather than loans. The same needs to be true for future disasters.

In addition, an automatic debt relief mechanism in response to serious disasters would help ensure money is available where it is needed, rather than leaving it to flow towards richer countries.

All that can be spent and done for disaster relief is vital in the days ahead. But we also need to question the underlying injustices which have enabled this disaster to be so devastating.

Dan Carden is shadow secretary of state for international development, and the Labour MP for Liverpool Walton.