Mozambique: Secret Debt Guarantee 'Criminal', 'Illegal' Says Government

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In its strongest public statement so far, the government has called the guarantees on the MAM and Proindicus secret debt to be "illegally obtained" and "criminally obtained". But it confirms the acceptance of the Ematum bonds and that they will be paid.

The $2 bn secret debt taken in 2013-4 was in three parts as loans to three companies largely owned by the security services. Proindicus borrowed $622 mn, $504 mn from Credit Suisse and $118 from VTB. MAM borrowed $535 from VTB. These loans are now challenged.

Ematum borrowed $850 mn in the form of bonds, which have been rescheduled twice and are accepted as payable.

In the government's request to the IMF for a Covid-19 rapid credit, its Letter of Intent from Minister of Economy and Finance Adriano Afonso Maleiane Bank of Mozambique Governor Rogério Zandamela says: (emphasis added)

"Last year, a restructuring agreement was reached with Eurobond holders providing substantial debt service relief. Mozambique’s Attorney-General has filed a lawsuit in the U.K. to nullify the criminally obtained government guarantee on the loan contracted by Proindicus SA, a state-owned enterprise, with Credit Suisse. Similarly, in its defense against a lawsuit brought by VTB in the U.K., the Government will seek to nullify the illegally obtained government guarantee on the loan contracted by MAM SA, another state-owned enterprise."

The IMF adds that "the government does not intend to support MAM, which will follow the normal course of commercial bankruptcy without backing, and the validity of the government guarantee on VTB’s loan to MAM is in dispute."

The full IMF document is here:

The Letter of Intent is on page 21 as Annex 1 of the main report.

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