"The country is coming out of the crisis"
Saint-Louis Studio / Steven Le Vourc'h (cropped) / Minister of Economy and Finance Adriano Maleiane
Financial analysts who follow the Mozambican economy agree that the government wants to avoid external aid and that negotiations with creditors will be complex and time-consuming, making economic recovery difficult.
“Our main conclusion is that the government will continue on this isolation path, accumulating debts to suppliers and creditors, heavily indebted to the domestic market and exacerbating macroeconomic imbalances while waiting for gas revenues,” the experts of the analysis unit of the British magazine ‘The Economist’ write.
“Debt renegotiation could be a difficult and time-consuming process but local authorities will have to make decisions in the coming months as Mozambique is still a country heavily dependent on international aid,” the chief economist of Eaglestone consultancy has told Lusa
“The resumption of aid from the IMF and other international donors, which is currently suspended, will depend on resolving this process and the country exiting the current financial default,” added Tiago Dionísio.
In an article on Mozambique, financial information agency Bloomberg wrote that “a year after Mozambique stunned investors by announcing a debt restructuring, talks with bondholders and the International Monetary Fund have led nowhere”.
The difficulties in the negotiations are based on the difference of perspectives between the Mozambican government and creditors. While the government wants to treat everyone equally, holders of US$727.5 million in debt securities, who have already had a cut in income, refuse to be treated the same as the banks and investors who lent about US$1.4 billion to public companies Mozambique Asset Management (MAM) and Proindicus.
The difficulties are also political and judicial, several analysts believe, as the disclosure of the entire Kroll report could prove the involvement of key figures from the ruling party.
Analysts at Exotix Capital believe that the IMF will not budge and will only resume financial aid if Kroll’s audit is fully disclosed and the prosecutor’s office reveals the fate of the US$500 million, which the consultancy says it cannot determine.
“We’re in this state of quasi-suspension. Nothing has been able to move forward. The IMF wants to help the country, but it can’t just reward bad behaviour,” said Stuart Culverhouse, director of research at Exotix, after a meeting with IMF and World Bank leaders in Washington.
Mozambique’s strategy, which has managed to survive the most critical phase of financial default and avoided a recession, has been aided by rising prices for coal and aluminium, the country’s two largest exports, which have, together with the appreciation of the metical, reduced the debt to GDP ratio from 114 percent in 2016 to 84 percent this year, according to IMF data.
From the investors’ point of view, the strategy seems to be “Hold on tight” until gas revenues begin to come in and the country can pay off its debts.
Bondholders want to know “the full and true financial picture of the country,” says financial manager Lutz Roehmeyer of the Landesbank Investimentos in Berlin, which manages more than US$4 billion, including Mozambican debt.
““How can one decide anything without full knowledge of the debt figures? But the bonds have traded up so the bondholders are happy. They see a bright future for the country after it cures its defaults,” Roehmeyer told Bloomberg.
There are, however, those who think that there will only be news in the medium term.
“This is the same regime that created the problem. Frelimo believes that the issue will die down with time, donors will forget, and sooner or later everyone will get back to business. All in all, I see restructuring discussions being initiated no earlier than 2020,” says Roberto Tibana, founder of Mozambican consultancy Analítica-RJT. That is, after the 2019 elections.Source: Lusa