Yields on Mozambique’s public debt rise to around 28%

13 January 2017

The possibility of Mozambique defaulting on its installment of US$59.8 million has led to yields on state-backed debt taken on by public companies rising to around 28%, according to financial news agency Bloomberg.

Investment bank JP Morgan said in a research note issued recently it was highly unlikely that Mozambique would be in a position to pay the installment due on 18 January.

In a statement issued by the bank, analysts Sonja Keller and Yvete Babb wrote that “the rhetoric of the authorities in the last three months implies they will refrain from making more payments until some form of restructuring is agreed.”

The Office of Economic Studies of Banco BPI (Portuguese Investment Bank) said a few days ago that Mozambique was “bound to fail” to pay the January installment due on public debt of US$727 million issued last year.

However, one of the main advisers to the creditors group argued that Mozambique must pay the installment in question, arguing that the country has the financial capacity to do so.

“It is in the interest of Mozambique and holders of debt securities for the government to pay the coupon,” said Charles Blitzer in statements cited by Bloomberg.

The former International Monetary Fund official said the situation in Mozambique has improved since October, noting that “in recent months the payment capacity has improved, as exchange rates and reserves stabilised and began to improve.” (macauhub)