Reuters International

Traditional fishing boats sail as Mozambique's tuna fleet sits in dock beneath Maputo's skyline, in this picture taken August 15, 2015. REUTERS/Grant Lee Neuenburg

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MAPUTO (Reuters) - Mozambique's tuna fishing fleet needs to be refitted to meet European Union standards, Finance Minister Adriano Maleiane said on Monday, piling more costs onto a project at the centre of a debt crisis.

The boats were paid for out of an $850 million (£586.7 million) loan arranged in 2013 by Credit Suisse and Russia's VTB to finance "fishing infrastructure". The cash came in the form of a government-backed bond to state tuna-fishing company Ematum.

Nearly three years later, the fishing project, initially touted as self-sustaining, has severely underperformed and added to a sovereign foreign debt mountain equal to 80 percent of GDP that could bankrupt the southeast African nation's government.

Mozambique is one of the world's most impoverished nations.

Not only did Ematum fall short of its targets but $500 million of the "tuna bond" was subsequently designated for "maritime security" and reallocated to the defence budget.

The 24 boats, which were built in France, will now be modified in South Africa so they can export tuna to Europe.

Mozambique's government cannot afford to have them all upgraded at once. “The costs involved in refitting the boats are high, hence the work is being done in phases," Maleiane was quoted by the state news agency as saying.

"Right now, we have part of the fleet ready, while other funds are being mobilised to pay for the rest," Maleiane added, without giving details on the cost of upgrades.

It was unclear why French-manufactured boats had to be adapted for EU standards.

Ematum's results published last year pointed to the fleet catching just $450,000 of tuna annually, compared with sales of $18 million forecast at that stage of its life in a 2013 feasibility study circulated by the government.

Deepening the mire, a further $1.35 billion of previously undisclosed government-backed debt emerged last month, prompting the International Monetary Fund and Western governments to suspend budgetary aid support.

The loans included $622 million for Proindicus, a state-owned company tasked with providing maritime security, and a $535 million for Mozambique Asset Management (MAM) to build a shipyard for gas projects.

Mozambican Prime Minister Carlos Agostinho do Rosario apologised last month for not coming clean about the loans to the IMF earlier.

The hidden loans have exposed widespread government mismanagement that risks pushing a promising African economy, one that emerged from a ruinous 1976-92 civil war, into crisis.

At a parliamentary budget commission last week, Maleiane said state firm MAM would be unable to make a $178 million loan repayment due on Monday.

Maleiane did not respond to request for further comment on the status of that payment.

(Writing by Joe Brock; Editing by Mark Heinrich)

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