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Johannesburg - Mozambique has given the IMF an "avalanche of documents" and owned up to as much as $1.35bn of undeclared sovereign borrowing that may have tipped it into an unsustainable debt trap, a Fund source said on Friday.
The borrowing is in addition to an $850m 'tuna bond' issued in 2013 that had to be restructured last month because the war-scarred southeast African nation was struggling to meet repayments.
The International Monetary Fund (IMF) said last week it had got wind of more than $1bn of undisclosed borrowing, although Finance Minister Adriano Maleiane dismissed the allegations and put it down to "some confusion".
Prime Minister Carlos Agostinho do Rosario then led a delegation to the United States to see IMF Managing Director Christine Lagarde and explain the borrowing and patch up tattered relations with the international lender.
"We're confident that we're not going to find anything else," the IMF source told Reuters, adding that Rosario's visit had gone some way to mending relations. "But we can't just go back to where we were. That takes time."
Mozambique's debt situation was now "very close to unsustainability," the source added.
Proindicus, a state firm owned by the Ministries of Interior and Defence and the State Security and Intelligence Service, had been lent $504 million by Credit Suisse and $118m by Russia's VTB, the source said.
According to a February 2013 Credit Suisse document obtained by Reuters, the money was to be spent on high-speed naval interceptors, radar stations, off-shore patrol vessels and aircraft. Credit Suisse has declined to comment on the document.
Another loan of $535m went to Mozambique Asset Management, another state company set up to build a shipyard in the northern city of Pemba, the source said. Pemba is near vast off-shore natural gas fields being explored by Anadarko and Eni.
In addition, the Interior Ministry had borrowed $130-$200m from an unidentified bilateral lender, the source added, without providing details.
The failure of Mozambique, Credit Suisse and VTB to disclose the extra borrowing during negotiations to reschedule the tuna bond has infuriated investors, some of whom have threatened to sue.
However, the IMF source urged them to be patient, saying that reigniting tensions would be more likely to trigger a serious default.
