January 3, 2019 / 3:31 PM / 14 days ago

Arrest of ex-Mozambique finance minister linked to debt crisis -lawyer

JOHANNESBURG, Jan 3 (Reuters) - U.S. charges against former Mozambican finance minister Manuel Chang relate to loans at the centre of the country’s secret-debt scandal and he will oppose any request for his extradition, Chang’s lawyer said on Thursday.

“He denies any involvement in criminal activities and will oppose any request for his extradition,” Rudi Krause, of BDL Attorneys, told Reuters in an email.

Chang, who oversaw Mozambique’s finances when it failed to disclose government guarantees for $2 billion in international borrowing by state-owned firms, was arrested in South Africa last week at the request of the United States.

The U.S. charges were initially reported by Mozambique’s state news agency to be unconnected. But Krause said they were indeed linked to the loans, whose disclosure plunged the southern African country into a suffocating debt crisis it is still struggling to climb out of two years later.

“The charges relate to the loans from two commercial banks and in respect of which the Mozambican government granted certain guarantees,” Krause said.

He added that he did not know how Chang’s involvement in the borrowing had allegedly violated U.S. law.

“That remains a mystery.”

Chang faces charges of conspiracy to commit securities fraud, conspiracy to commit wire fraud and money laundering, according to Mozambique’s state news agency, and is set to appear in court in Johannesburg on Jan. 8.

In a note following Chang’s arrest, Darias Jonker, Africa director at Eurasia Group, said his potential extradition could bring fresh revelations around the debt scandal ahead of closely contested elections in Mozambique later this year.

Audits into what happened have left some questions unanswered, including the whereabouts of between $700 million and $1 billion in public funds.

If linked to members of the former government or ruling party, Frelimo, during U.S. legal proceedings, the scandal could sap support for the government ahead of the October vote and set back Mozambique’s efforts to rebuild its reputation abroad.

“Mozambique is facing a crisis and will do whatever they can to prevent Chang from cooperating with the U.S., as he is very likely to implicate other senior members of Frelimo,” Jonker told Reuters by email on Thursday.

Chang is seen as a key figure in the debt scandal, having signed off on guarantees for the loans obtained from Credit Suisse and Russia’s VTB bank in 2013 and 2014.

Their disclosure in 2016 prompted foreign donors including the International Monetary Fund (IMF) to cut off support for Mozambique, triggering a currency collapse and debt default. The IMF said it believed Mozambique had concealed the borrowing. (Reporting by Emma Rumney Editing by Mark Heinrich)

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