Maputo — The Mozambican Minister of Economy and Finance, Adriano Maleiane, on Wednesday denied that by negotiating with the holders of bonds that were initially issued by the fraudulent company Ematum, the government was violating a ruling by the Constitutional Council, which is effectively the country's highest court.
Ematum was one of three fake companies which obtained over two billion US dollars in loans from the banks Credit Suisse and VTB of Russia in 2013 and 2014, on the basis of illegal loan guarantees issued by the Mozambican government of the time, headed by former President Armando Guebuza. The 850 million dollars for Ematum took the form of a bond issue on the European markets.
In April 2016, the Ematum bonds were replaced by sovereign government bonds with a longer repayment time, but at a higher interest rate.
Shortly after the swap was announced, in April 2016 the other two illicit loans became public knowledge, and so did the true extent of Mozambique's foreign debt. The International Monetary Fund (IMF) accused the government of concealing the reality of the country's macro-economic situation, and suspended its programme with Mozambique.
The government ceased all payments on the Ematum, Proindicus and MAM loans but continued talking to the creditors.
In early June this year, the Constitutional Council declared null and void all acts concerning the Ematum loan and the government's loan guarantee, "with all the legal consequences" that flow from this declaration.
Speaking on Wednesday at a conference organised in Maputo by the British paper, the "Financial Times", Maleiane, cited by the Maputo daily "Noticias", denied that the continued talks with the ex-Ematum bondholders challenged the authority of the Constitutional Council, because only creditors "in good faith" would be compensated.
"The government respects the decisions of our institutions", claimed Maleiane. "The decision of the Constitutional Council cannot be annulled. It must be respected, and we are respecting it".
The restructuring of the ex-Ematum debt, he said, only envisages payments to creditors who acted in good faith. The government could not tell such creditors that it would not pay them.
Maleiane argued that it is now up to the Attorney-General's Office (PGR) "to oblige those responsible for contracting these debts to compensate the State for the costs it is incurring with the bonds arising from the loans. So the PGR has this task of seeking the 850 millon dollars".
But the Constitutional Council drew no distinction between "good faith" and "bad faith" creditors. It ruled that "all acts" inherent to the Ematum loan are null and void and it made no exceptions.
The term "all acts" clearly includes negotiations with the bondholders.
Those who brought the Ematum loan before the Council (including the Budget Monitoring Forum, FMO, and the Ombudsman) were not interested in whether creditors acted in good or bad faith. They wanted the Council to rule the entire Ematum scandal illegal and unconstitutional, so that Mozambique would no longer pay any money at all to the creditors.
The latest Finance Ministry documents on the talks with the bondholders do not so much as mention the Constitutional Council ruling.
The deal, offered by the Finance Ministry, and accepted by 99.5 per cent of the bondholders, is that the existing bonds, with a face value of 726.5 million dollars, will be swapped for new bonds, valued at 900 million US dollars, with an accrual date of 15 July this year, and maturing on 15 September 2031.
Annual interest will be five per cent up to 1 September 2023, and then an extortionate nine per cent from 2023 to 2031.
Under this deal, Mozambique will pay the interest in arrears every six months, starting in March 2020. The capital will be paid in eight equal six monthly instalments of 112.5 million dollars, starting in March 2028.
This massive outflow of funds is precisely what those who petitioned the Constitutional Council wanted to avoid.