No escape for Mozambique as debt troubles mount

The IMF this month issued a report blaming the country's economic woes partly on "undisclosed loans in the spring of 2016 and the ensuing freeze in donor support".

29 March 2018 | Economics

It threatens the wellbeing of the Mozambican people in the present and in the future. - Celeste Banze, Mozambique Public Integrity Centre

Joaquim Nhamirre – Mozambique's renewed efforts to solve its spiralling "secret debt" crisis have again collapsed, leaving the country struggling to recover its reputation as one of Africa's potential growth hotspots.

Last week, finance minister Adriano Maleiane flew to London to present creditors with a long-awaited restructuring plan for the US$2.2-billion debt that Mozambique has defaulted on since last year.

Maleiane presented options including a massive write-down, low interest rates until 2023 and a partial swap for a local long-term debt.

All his proposals were dismissed by the Global Group of Mozambique Bondholders, which says it represents most of the holders of the Eurobond debt and commercial loans to state-owned companies.

The bondholders sharply criticised the proposed repayment plans, saying "the main lines of debt restructuring do not serve to start any conversation leading to a workable resolution".

Mozambique was forced to admit in 2016 that the loans had been kept secret and were spent on maritime and military ships and equipment.

The government later said it did not disclose the huge loans as they were a matter of national security, allegedly linked to unrest between 2013 and 2016 that echoed the country's civil war, which ended in 1992.

The debts were supposed to be repaid via an anticipated windfall from recently discovered natural gas deposits - but that has so far failed to materialise.

Proposals

Mozambique's latest repayment proposals "were specially prepared for creditors, ignoring everything else", Celeste Banze, of the Mozambique Public Integrity Centre, told AFP.

"It threatens the wellbeing of the Mozambican people in the present and in the future.

"The government has overly optimistic expectations regarding the collection of revenues from gas that may or may not be effective given price volatility."

When news of the secret loans broke, major donors - including the International Monetary Fund (IMF) and World Bank - suspended aid to the southern African nation, pitching it into further economic hardship.

Economic growth fell from 6.6% in 2015 to 3.7% in 2017, with government debt soaring to 112% of gross domestic product (GDP) by the end of last year.

The IMF this month issued a report blaming the country's economic woes partly on "undisclosed loans in the spring of 2016 and the ensuing freeze in donor support".

Last year an audit by New York-based forensic accountants Kroll compounded the crisis when it concluded that US$500 million of the US$2 billion borrowed from foreign banks including Credit Suisse was still unaccounted for.

The loans were taken out under the previous government of Armando Guebuza, but the political hangover has dominated the reign of President Filipe Nyusi.

With an eye on fragile voter support, Nyusi is seen as reluctant to expose those in the ruling Frelimo party responsible for the debt scandal - a stance that prevents the IMF beginning an aid package.

"Nyusi is currently positioned to narrowly win the 2019 presidential election but will need to ensure that senior Frelimo members are not implicated in the secret debt scandal," said the Eurasia risk consultancy.

"Therefore he will be forced to ignore the demands of the IMF and donors for further disclosures."

‘Macabre’

The opposition Renamo group, which has been growing its support and hopes to receive a major boost at local polls later this year, has described the debt as illegal and void.

"We cannot pay debt that does not belong to Mozambicans. Using gas revenue to pay off debt is macabre - you can't use a nation's resources to pay illegal debts," Renamo spokesman Jose Manteigas told AFP.

"We want criminal accountability of people who have contracted the debt and those who have diverted money for illicit purposes."

Opposition

Venancio Mondlane, an MP for the opposition Mozambique Democratic Movement, said the government, prosecutors and the ruling party were working together to "thwart any attempt at accountability".

He also called for the creditors to be held responsible under international law for the "illegitimate" loans.

The debt has already built up US$636 million in arrears - but revenues from the new gas fields are only predicted to kick-in by 2023.

For now, Mozambique and its debt holders have little choice but to continue talks despite their differences, with another meeting planned in April.

The Global Group of Mozambique Bondholders said it hoped to soon begin negotiations "in good faith to achieve a fair settlement".

Meanwhile, there is little hope on the horizon of any real change for the nearly 50% of Mozambicans who live in poverty, according to World Bank statistics. – Nampa/AFP

Similar News

 

New electronic transfer system to be launched

1 day - 22 July 2021 | Economics

A new electronic funds transfer system has been gradually introduced into the Namibian market, with all stakeholders in the banking industry collaborating on the wide-ranging...

Vigilantism growing in South Africa

1 day - 22 July 2021 | Economics

SOFIA CHRISTENSENArmed community members and vigilante groups have stepped in to tackle unrest in South Africa, taking matters into their own hands and sometimes stoking...

Developing countries are addicted to coal

1 day - 22 July 2021 | Economics

JOHN KEMPCoal-fired power plants are proving hard to shut down in developing economies because they are cheap and convenient, but keeping them going is pumping...

Zambezi customs revenue drops by N$23m

1 day - 22 July 2021 | Economics

KENYA KAMBOWERUNDUThe directorate of customs and excise in the Zambezi Region recorded a N$23 million reduction in revenue collected during the 2020/2021 financial year. This...

Namibia’s construction sector still on mute

2 days ago - 21 July 2021 | Economics

PHILLEPUS UUSIKULand delivery was one of the challenges pointed out in the recently released First National Bank (FNB) residential property report.According to the report, for...

SA tourism on edge with double virus impact

2 days ago - 21 July 2021 | Economics

GREGORY WALTONGraced with rolling vineyards, bountiful big game, the iconic Table Mountain, endless sandy beaches and vast cultural riches, South Africa would have expected to...

Investors capitalising on low property prices

3 days ago - 20 July 2021 | Economics

PHILLEPUS UUSIKUThe accommodative monetary policy and struggling rental market has created a window of opportunity for property investors to capitalise on distressed sales.According to Frans...

'Freedom day' in England despite warnings

3 days ago - 20 July 2021 | Economics

London - Virtually all pandemic restrictions were lifted in England yesterday but "freedom day" was met with deep concern from scientists as coronavirus cases surge...

SA unrest to prove costly for economic activity

3 days ago - 20 July 2021 | Economics

The current unrest in South Africa will likely prove costly for the country in terms of damage to property, dampening subdued confidence and weighing on...

Africa needs vaccines to revive tourism

3 days ago - 20 July 2021 | Economics

DUNCAN MIRIRIAfrican countries need to get equal access to Covid-19 vaccines so they can start rebuilding their devastated tourism industries, Kenya's tourism minister said on...

Latest News

New electronic transfer system to...

1 day - 22 July 2021 | Economics

A new electronic funds transfer system has been gradually introduced into the Namibian market, with all stakeholders in the banking industry collaborating on the wide-ranging...

Katjavivi rapped over knuckles for...

1 day - 22 July 2021 | Justice

MATHIAS HAUFIKU WINDHOEKJudges hearing the appeal in the matter between National Assembly Speaker Peter Katjavivi and suspended Landless People’s Movement (LPM) leaders...

Govt to fight AR over...

1 day - 22 July 2021 | Agriculture

ELLANIE SMIT WINDHOEKThe government intends to fight a lawsuit in which Affirmative Repositioning (AR) activist Job Amupanda demanded the removal of the...

MPs ‘scared’ of LPM leaders

1 day - 22 July 2021 | Government

MATHIAS HAUFIKU WINDHOEKLawmakers fear that their safety will be in jeopardy if Landless People’s...

Vigilantism growing in South Africa

1 day - 22 July 2021 | Economics

SOFIA CHRISTENSENArmed community members and vigilante groups have stepped in to tackle unrest in South Africa, taking matters into their own hands and sometimes stoking...

EDITORIAL: Criminalise long suspensions

1 day - 22 July 2021 | Opinion

Hundreds of government and public enterprise employees are currently on suspension with full pay.Some of them have been on suspension for as long as two...

Opuwo police arrest more than...

1 day - 22 July 2021 | Crime

NAMPA OPUWOMore than 30 people were detained at Opuwo from the beginning of June...

South Africa unrest hits 40...

1 day - 22 July 2021 | Business

At least 40 000 South African businesses were looted, burnt or vandalised during widespread rioting that broke out after the jailing of ex-president Jacob Zuma,...

Delayed justice lawsuit delayed again

1 day - 22 July 2021 | Justice

JANA-MARI SMITH WINDHOEKA former taxi driver’s legal battle to be awarded millions in damages...

Load More