22 February 2018

Mozambique Willing to Negotiate With Creditors

Maputo — Mozambique is ready to renegotiate its “hidden debts” with the creditors, declared the Minister of Economy and Finance, Adriano Maleiane, on Wednesday.

Cited by the independent television station STV, Maleiane said “we are working on the strategy to bring our public debt to sustainable levels. We are interacting with the relevant institutions and we are ready to go to London to discuss the matter with the creditors”.

“We have a team that is negotiating”, said Maleiane, and he expected the next meetings to take place “in the second half of March”.

The term “hidden debts” refers to the government-guaranteed loans of over two billion US dollars that the quasi-public security related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) contracted with European banks (Credit Suisse and VTB of Russia in 2013 and 2014).

The government stopped any repayment of the interest or capital on these loans in early 2016. At a meeting with creditors in London in October of that year, the government said repayment was out of the questions, and asked the creditors to negotiate better terms.

Maleiane said the “hidden debts” represent a relatively small slice of Mozambique's total foreign debt. 87 per cent of the debt is in the shape of multilateral or bilateral loans, and Mozambique has been able to continue paying the service on those debts.

The problem is that the Ematum, Proindicus and MAM loans, while only 17 per cent of the debt stock, account for 50 per cent of the total debt service. Or would do, if the government was repaying any of these loans. This disparity is because the three companies took out the loans on commercial terms, with high interest rates and short repayment periods.

All three companies are effectively bankrupt, and the government is refusing to honour the illicit guarantees issued by the previous government under President Armando Guebuza.

The high percentage of debt servicing represented by the three loans “is a problem”, said Maleiane, “and that's why we're negotiating”.

The Minister was speaking after signing an agreement with the African Development Bank (ADB), under which the ADB is providing a grant of 30 million dollars to the Mozambican relief agency, the National Disaster Management Institute (INGC) and to the Lurio University.

After the ceremony, the Vice-Chancellor of the Lurio University, Francisco Noa, said the 15 million dollars his institution will receive “will be invested in engineering laboratories, libraries, and improving the university's lecture theatres”.


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