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Finance Ministers should never say “we aren’t going to pay our debts”, merely “we can’t pay them”, argued Mozambique’s former Prime Minister, Luisa Diogo, on Tuesday.
Speaking in Maputo at a conference on “how to do business in times of recession”, Diogo said it would be no good for a minister to tell creditors “we’re not going to pay”, just because the minister disagrees with the debt.
It would be much better to take the objective position of “we can’t pay” – and she noted that this was precisely the line taken by the current Finance Minister, Adriano Maleiane, in relation to the illicit debts contracted by the previous government, headed by President Armando Guebuza.
The Guebuza government issued illegal guarantees in 2013 and 2014 for loans of over two billion US dollars granted by European banks (Credit Suisse and VTB of Russia) to three security-related Mozambican companies, which are now virtually bankrupt and with not the slightest chance of repaying the loans. Those guarantees added 20 per cent to Mozambique’s foreign debt, pushing it to unsustainable levels.
Last October, Maleiane had told creditors at a meeting in London, that it was quite impossible for the government to pay these debts, and so he urged the creditors to renegotiate them.
Diogo approved of this – but hoped the government has a strategy on what to do next. “If it doesn’t have a strategy, it had better draw one up as quickly as possible. It has to say how things stand – for the causes of the debt are one dossier, and the accounts are another”.
When the government says “we can’t pay”, it must be prepared “to sit down with the creditors and see what happens now”. She pointed out that creditors are not all the same – there were Mozambique’s traditional creditors (presumably she was thinking about bodies such as the World Bank, the African Development Bank, and some bilateral partners such as France or Japan), and with them “special care is needed”.
Other creditors, however, should be treated differently – a polite way of saying that the creditors in the case of the illicit debts could not expect to see their money any time soon.
Diogo believed that eventually the Mozambican government would have to sit down with key players such as the International Monetary Fund (IMF) and the World Bank, and find “a definitive position towards the Mozambican debt”.Source: AIM