The Government of Mozambique officially admitted the financial inability of the state to pay the next installments of the debts of public companies with hidden loans, and called for a restructuring of payments and a new financial aid from the International Monetary Fund (IMF).
20-page document presented to investors by the Ministry of Finance (MF) states that “the profile of public debt and debt guaranteed by the State of Mozambique is not sustainable.”
The ministry pointed out in the document to which Portuguese news agency Lusa had access, the inability to pay the debts of enterprises that had undisclosed loans, admits that public debt in 2016 will reach 130% of GDP, and lowers its economic growth forecast to 3.7%.
“The depreciation of the local currency exceeded the increase in debt volume and the cost of servicing the debt, the level of external public debt and debt guaranteed by the state will exceed 100% of GDP in 2017, the cost of servicing public and publicly guaranteed debt, including late payments, should reach US$826 million, on average, between 2017 and 2021, or roughly 6.9% of GDP per year,” according to the presentation provided to creditors.
According to the rules of the IMF, it may not provide financial assistance to a country under financial strain and therfore the Finance Ministry is proposing a number of meetings with creditors of state owned enterprises Mozambique Asset Management and Proindicus.
Mozambique has a political credibility problem with the IMF and international creditors, after having concealed debts amounting to US$1.4 billion contracted in recent years leading international creditors to demand an external audit to relaunch talks on the resumption of financial assistance.
The Ministry gave assurances that there had already been “considerable progress in the drafting the terms of reference for the audit” and confirmed that “the audit will focus on Ematum (Empresa Moçambicana de Atum), Proindicus and MAM”.
The main objective now is “to resume relations with the IMF to stabilise the economy and restore the confidence of the international community.”
The government of Mozambique has hired financial and legal advice from British firm Lazard Frères and White & Case LLP, respectively to negotiate with creditors. (macauhub)