"I call it the Rule of Three. If you read a company's financial statements three times, and you still can't figure out how they make their money, that's usually for a reason." - James Chanos
What will come to your mind if a top financial institution in your country released its financial reports and list of debtors on all leading newspapers, and you find that your name was listed as a debtor who has borrowed an amount six times your worth? A loan you know nothing about!
Well, that was the position 'little' Central African Republic (CAR) found itself in when Russian State Bank, VTB released its financial statements this week with a part of it showing that the institution had lent the country the sum of 801,933,814,000 roubles ($12 billion) as at October 1, 2018.
This is more than six times the annual output of the African country.
Central African Republic (CAR) has a population just about 5 million and according to reports by the World Bank, the country's Gross Domestic Product (GDP) is only $1.95 billion.
After the report raised a lot of concern, the Bank released a statement saying the part of the report that said it loaned CAR $12 billion was a 'clerical error' and that there was no such loan.
“VTB bank has no exposure of this size to any foreign country. Most likely, this is a case of an operational mistake in the system when the countries were being coded,” the Bank said in a statement sent to Reuters.
But how can a Bank the caliber of VTB make such an error, especially when it involves such a huge amount of money?
Spokesman of the Government of Central African Republic, Ange Maxime Kazagui in reacting to the matter said:
“I don’t have that information. But it doesn’t sound credible because $11 billion is beyond the debt capacity of CAR.
“We are members of the IMF (International Monetary Fund). When a member of the IMF wants to take on debt … it has to discuss that with the IMF.”
The Bank is however yet to clarify if such a loan was given to another African country it had mistaken for CAR or if such a loan was not existent at all.
Header Image Credit: Financial Times