Mozambique has highest public debt interest rates in the world

3 November 2016

Interest on the public debt of Mozambique became the highest in the world this week, rising to 25.1% a year, overtaking Venezuela as the riskiest country for investment, financial news agency Bloomberg reported.

According to the changes in interest rates that investors demand to trade public debt issued in dollars, since Monday the value of eurobonds maturing in 2023 exceeded the average interest on Venezuelan debt issues.

The graph that shows the evolution of interest reveals a sharp rise since last week when the Ministry of Finance made a presentation to investors in London, in which it admitted its inability to service public debt, including the portion of about US$38 million in bonds of tuna company Ematum, which were converted into sovereign debt in April.

In the presentation, over 20 pages, the Ministry of Economy and Finance demonstrated its inability to pay the debts with state guarantees, admits that public debt will reach 130% of GDP this year and takes the opportunity to lower its economic growth forecast to 3.7%, also stating bluntly that debt metrics are unsustainable.

“Mozambique currently exceeds all five indicators to assess debt sustainability,” the document says, which proposes, therefore, a series of meetings with creditors of state-owned enterprises Mozambique Asset Management and Proindicus.

The main objective now is to “resume relations with the IMF to stabilise the economy and restore the confidence of the international community,” but the government admits that “discussions can only start if Mozambique is no longer in the “debt distressed” country category, which implies that finances and public debt must be on a sustainable path.” (macauhub)