CIP opposes using gas revenues to pay illegal debts

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CIP opposes using gas revenues to pay illegal debts

5:16 CAT | 12 Nov 2018

In file CoM

Mozambique’s main anti-corruption NGO, the Centre for Public Integrity (CIP), has accused the government of “mortgaging the well-being of Mozambicans” to pay off the illegal debts inherited from its predecessor.

The debts in question are the over two billion dollars of loans obtained in 2013 and 2014 from the European banks Credit Suisse and VTB of Russia by the security related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management). The only reason the banks granted such large sums to previously unknown companies was that the government, then led by President Armando Guebuza, guaranteed repayment.

The government guarantees were in flagrant violation of the limits on loan guarantees laid down in the 2013 and 2014 budget laws, and also breached a clause in the Mozambican constitution which states that only the country’s parliament, the Assembly of the Republic, may authorise such debt.

The three companies are effectively bankrupt, and quite unable to repay the creditors. Unlike the Proindicus and MAM loans, the banks financed the loan to Ematum with a bond issue in Europe.

Last week the Ministry of Economy and Finance announced the outlines of a deal with the ex-Ematum bondholders, which involves issuing new bonds and “value recovery instruments” linked to fiscal revenues from the liquefied natural gas projects in the Rovuma Basin off the coast of the northern province of Cabo Delgado.

Thus, even before any LNG is produced, the government is committing revenues from this resource to paying off illegal debts incurred by its predecessor.

CIP finds this proposed restructuring of the Ematum debt unacceptable. It calls upon the Mozambican parliament, the Assembly of the Republic, to reject this form of debt restructuring “which compromises the well-being of an entire generation”. Instead, it should look for “other alternatives to re-establish trust in the country among the international community”.

Debt restructuring, CIP says, “should protect the interests of Mozambicans, promote economic growth, and allow public expenditure to favour goods and services that are essential for the priority sectors”.

The “dangerous” proposals made by the government, the statement continues, “demonstrate a predatory behaviour aligned with the creditors, which in no way favours the development of the country”.

So far only the bare outlines of the deal with the bondholders have been made public. CIP demands that, when an agreement is reached with all the creditors (including the Proindicus and MAM debts), it must be shared in full with the Mozambican public.

CIP states it is “vehemently opposed to the use of future gas resources to pay illegal debts”. This would be a “double loss” for the country – first because a whole generation of Mozambicans would be saddled with responsibility for an unsustainable debt which only served “hidden interests”, and it then mortgages future gas revenues to pay these same debts “which never provided any benefits for Mozambicans”.

Source: AIM