one-of-a-kind and talented beyond measure. ♪ time for a quick check of the headlines, democrats in the u.s. house of representatives have chosen akeem jeffries as the new party leader. the congressman from new york will succeed nancy pelosi in january. he is the first black person to lead a major party in congress. the u.s. military has confirmed the leader of isil has been killed in an operation carried out by the free syrian army in october. he is the second isil leader to be killed this year. here's more from washington dc. >> this happened in the south,

this will now be the fourth leader of isil since al-baghdadi was killed in october 2019 by the u.s. and his successor was then killed in february, also by the u.s. we have this killing in october by the free syrian army, an interesting detail is that it is the free syrian army that conducted this raid, according to the u.s. darren: at least 15 people have been killed in a bombing in northern afghanistan. at least 20 others are wounded. the interior affairs ministry said students are among the dead. wrench president emmanuel macron has kicked off a state visit to the u.s. with a meeting with vice president harris. he is set to meet president biden on thursday. nato has discussed sending more air defense system to ukraine as foreign ministers met in romania

for second day of talks. the alliance pledged its unwavering support to some of russia's neighbors who feared being destabilized by moscow. an independent panel has found a leader violated his oath of office which could lead to his eventual impeachment. the panel was set up after millions of dollars in cash was found in a sofa at his private farm. those are the headlines. we will continue here on al jazeera following inside story. thanks for watching. ♪ >> it's a financial scandal that crashed mozambique's economy. a court has now begun to deliver its verdict against 19 former

officials who were accused of crimes that include money-laundering and bribery. so how will the nation move on? can it move on? this is inside story. ♪ hello and welcome to the program. i'm adrian finighan. it's become known as the putin debt scandal and it's one of the biggest scandals, according mozambique has been unable to deliver its verdict which is expected to take five days in the trial of 19 people who are accused of a wide range of financial crimes in connection with the $2 billion scheme. the defendants are former senior government officials, including the son of an ex-president. let's take a closer look at this case.

the accusations relate to a number of deals made in 2013 and 2014. three state owned firms borrow more than $2 billion, arranged mostly in secret with the help of investment banks credit suisse and btv. it was said it was to help build a new fishing fleet, but instead it was spent on military gunships while hundreds of millions of dollars were reportedly paid in kickbacks. those accused of benefiting included politicians in mozambique and european bankers. when the scandal emerged in 2016, the imf and world bank -- attribute asylum -- triggered a sovereign debt default. the economic followed has pushed an estimated one point 9 million people in mozambique into poverty. ♪ let's bring in our guest for

today's discussion. they are joining us from mozambique. we have the founder and executive director of an organization for social change in mozambique. fernando is the founder of the first independent mozambique media group, and an investigative journalist, researcher at the anticorruption nonprofit watchdog public integrity center. a warm welcome to you all. denise, we will start with a deceptively simple question, on a discussion around an incredibly complex topic here. the feeling that wherever we start the discussion, it will be the wrong place to start, but we've got to start somewhere. how did this scandal come to light? denise: the scandal came to light in 2016 when the wall

street journal decided to publish a story on the fraud, three recently created companies from mozambique contracted $2.4 billion debt with credit suisse who arranged with investors in the u.s., and as far as we know, the investors in the u.s. denounced the fraud to the department of justice, who started an investigation. during that investigation the wall street journal had access to information and they basically disclosed all the fraud. adrian: before that, no one knew anything about it, it had been kept secret? denise: in fact, we knew about the money laundering, we knew about the $850 million loan, because it was included in the state budget, and at the time,

we were analyzing the state budget and we questioned the minister of a finance and the budget committee from parliament about the amount in the budget. at the time it was said it was for fishing boats and for defense, and the money was for fishing boats. so we knew about one of the loans but not about the other two loans. adrian: and nobody smelled a rat, is that right? denise: yes, you're right. adrian: fernando, there are 19 defendants in this trial. have the right people been charged, and will civil society in mozambique get the accountability, the justice that it deserves? fernando: it seems that not everybody will be on trial or will be sentence, but a number

of significant people involved in this fraud have set at this trial. top people at our security apparatus, and other people that were cooperating with the scam related to the money's that were brought from credit suisse and the other bank, a russian bank. adrian: so to an extent, will it mean that some people who were involved in the scandal get away with it? and will that be enough to satisfy civil society there in mozambique? fernando: according to what civil society has already expressed and made public, not at all, because the position of civil society organizations

relating to the state, it should be reimbursed for all the damage that has been caused to the mozambique state. so at this point, what has been recovered from those loans, related to what people have bought with the money's, from a lebanese company. this is just about 10% of the money involved which is 2.2 billion dollars u.s.. so a minimum amount of those moneys involving this scandal have been recovered or are potentially to be recovered, not the large amount of the money. but at the same time, there is an action now being placed in

london and eventually the state could also recover money related to the company involved in the fraud, and also from the banks involved in the fraud, which are credit suisse and bdp. adrian: as we said at the beginning of the program, the court has begun to deliver its verdict. how fair was the trial? can we be confident that justice will be served in this case? is there any reason to doubt the independence of the court? >> i think they are independent enough, i understand that some people are questioning -- but in this case, we're seeing a former

president being tried, also the former head of the security service being tried and others in government. it is good that the judge decided to broadcast live the trial so that everyone can watch it, and listen on radio and tv. but it is not enough, because the people who are being tried here are not the ones who decided to -- the leader has not been tried, and also the current president has a lot to do with

the debt also and has not been brought to court. so while i believe that this is a good and important trial -- adrian: we said at the beginning of the program that this loan deal was kept hidden from parliament. why were the justice system and parliament overseeing the actions of the executive in the first place in mozambique when this original loan was taken out? why did mozambique's checks and balances fail? >> it simply because mozambique is a territory where executive power is sometimes controlled -- the president at that time and

his ruling party members -- it happened in 2014. adrian: denise, do you want to pick up on that point, on why this original loan deal was kept hidden from parliament? why wasn't the imf notified about it? doesn't this in itself prove criminal intent? denise: it does prove criminal intent. the fact that the former finance minister is still arrested in johannesburg awaiting the decision of the courts about his extradition to mozambique, it's a clear indication of criminal intent. the fact that we have an

authoritarian regime, which actually makes the majority of the parliament is made of the ruling party, which doesn't allow an independent neutrality in the rulings of parliament. so it gives all the opportunities for illegal debt to be contracted in mozambique. we still sue -- see that being contracted in mozambique without the approval of parliament. that is still happening, and unfortunately a system is not in place to provide full transparency for civil society to scrutinize on the debts that are contracted by the government. adrian: so you are saying this is far from throwing things wide open, the scandal has had the opposite effect and that it has reduced criminal activity, the state has become more

authoritarian as it tries to overcome -- as it tries to cover up its actions. denise: yes, it does. and we feel that they are going back to supporting the government of mozambique without minimal traditions of transparency being introduced in our public financial system, which means we will continue to contract that illegally. adrian: who benefited from this $2 billion loan, which was meant to be for a fishing fleet, except for bribes, very little of that money actually went to mozambique. >> that is true, because all the materials that were supposed to arrive in mozambique and to be used, for example by the armed forces, by security forces, they

are not working. the surveillance systems are not working. and according to an audit that had been done on materials provided, it seems that it was part of the scam not to provide proper equipment to mozambique. so mozambique was -- on different grounds. not only did it not receive the proper equipment that had been promised to the country, the prices were scandalous, raw equipment and materials were overpriced. a lot of people benefited from these scam, people outside of the government, including swiss bank officials that were bribed

by the companies and other people, we don't know to what extent they benefit from this scam. people within the ruling party in the government of mozambique. we do not know yet what extent there were other damages that have been committed against the mozambique state. adrian: picking up on something you were talking about a few minutes ago, what hope then is there of mozambique recovering any of this stolen money, which in many cases has already been converted into other assets like property? >> yes, mozambique is being very active to recover those moneys.

as i emphasized before, this is a little portion of that, and i hope that the mozambique state with legal actions in the court will manage to extract from credit suisse and from the company that provides all the materials, some additional moneys related to this scam. so this trial that we are talking about here is just a small portion of the whole scandal, and of course we have a situation in which mozambique will try not to pay back the credits and loans they got from the two banks involved in the scam. adrian: what damage has this

done to mozambique's international standing and reputation? >> i think mozambique will never recover what the debt has created. since -- besides talking about the economic damage which is high, it was concluded that after 2019, -- the fact of economic damage, it has been downgraded a lot. the government tried to control the situation, all this damage

has been created. human rights in mozambique is falling a lot. the imf -- this is something that is happening. when i meet someone, they ask, how is the debt in mozambique? so this is something that will never recover in the next few years. adrian: as the founder and

executive director of an organization that campaigns for social change in mozambique, i want to ask about what impact this has had on the people there. when the scandal first came to light, the currency halved in value against the u.s. dollar and the imf withdrew its support. how has that impacted the economy, the financial health of its people? what impact has it had on public spending? denise: it has been tremendous. immediately after the disclosure of the loans come as you said, donors withdrew from the state budget, and that led the mozambique government to implement austerity measures and cuts were made to health, education, water and sanitation sectors. that is had a direct impact in how people access medication, how they access medicine, health

services. we have seen that the health network and the health education network has become stagnant since the disclosure of these loans. and above all, i think the impact has been in the pocket of the citizens. the economic impact has been tremendous because we have seen that investors are thinking twice before investing in mozambique. that means in effect -- it affects the physical space of the country for development, for investment. mozambique is being penalized twice, once for having to live day by day with the political debts, and twice by having to pay for the loans which is being

paid every three months. in addition to that, the economy is stagnant. the economy is not growing, which means it has a tremendous impact on the citizens. adrian: 2 million additional people pushed into poverty, and as denise was saying, that loan still needs to be paid, it hasn't gone away. is it going to be forced to continue servicing that debt, plus additional costs? what further damages that going to cause? fernando: it's a very difficult scenario. that's why i think the government will decide this strategy to also raise doubts about paying back that debt.

in fact, unfortunately, the government is already paying the moneys involved in the boat company, the tuna fishing company is not working, never worked, but because there are private investors, mainly investors in the united states involved in those boats of the tuna fishing company, those are being financed in spain, that particular loan. what has not been paid up to now is the loan for the company that was providing all the equipment for security purposes, and another company that was involved in assuming the

maintenance of all the security equipment. so these loans are still pending on the mozambique people, on the government of mozambique, but i hope that we will never pay all of that loan. adrian: could something like this happen again in mozambique? is it happening elsewhere in africa? are there enough checks and balances and transparency in the system to prevent something like this happening again? >> unfortunately, the answer is yes, this is something that might happen again in mozambique. in a couple of years when this government leaves power, the problem has not been solved.

we hear that the people who contracted the debt, they are proud of that. they say i did it for my country. this is something that might happen again. a company approached the nigerian government -- we have seen the minister of finance in nigeria was questioning how big it was, to defend the country. adrian: i'm afraid we must end

our discussion. thank you all for being with us today on inside story. as always, thank you for watching. don't forget you can see the program again any time by visiting our website at al jazeera.com. for further discussion, join us on our facebook page. and you can join the conversation on twitter. for me, adrian finighan, and the whole team, thanks for watching. we will see you again. goodbye.

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