Has government said it won’t repay secret debt? By Joseph Hanlon

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Has government said it won’t repay secret debt? By Joseph Hanlon

7:50 CAT | 17 Apr 2017

File photo / Ematum boats docked in Maputo

Government statements on the $2 bn secret debt in a parliamentary debate last week on the 2015 state accounts have been interpreted in diametrically opposite ways. Some, including this writer and AIM, read the statements to mean that the government has, in effect, agreed that the debt guarantees are illegal and the debts themselves illegitimate, and has no intention of repaying at least part of the debt. Others, including opposition parties MDM and Renamo, plus respected journalist Aderito Caldeira in @Verdade, argue that by including the debt in the budget statement, the state has retrospectively accepted the guarantees and will pay.

At issue are three loans and two bond issues, totalling $2 bn, for three private companies owned by the state and controlled by the security services, SISE. The loans and bonds were agreed in secret in 2013-4 and include dubious government guarantees. Both the Tribunal Administrativo (TA, Auditor General) and a special parliamentary commission have found that the guarantees were granted without authorization of parliament, as required by the constitution, and thus are illegal and unconstitutional.

In the 2015 accounts submitted to parliament on Wednesday 12 April, the government says that the guarantees were issued and that they were “above the budget law”, which appears to be a government confirmation that the guarantees are illegal and unconstitutional. In a statement to parliament on Thursday, Prime Minister Carlos Agostinho do Rosario said “the government reaffirms its commitment to honour repayment of debt that has been proven to have been in the public interest”, adding that “we shall continue to observe a balance between the need to honour debt servicing and the imperative to continue financing priority action for economic and social development”. Arguing, in effect, that some of the debts are not proven to be “in the public interest” is to argue that they are “illegitimate” and the liability of the lending banks, VTB and Credit Suisse, because they made improper loans.

The position is confused because the two initial Eurobond issues, both for the Ematum tuna fishing company, became known in 2014 and were eventually replaced in 2016 by government bonds. In effect, government returned to parliament and retrospectively agreed to honour the guarantees and issue new bonds. The three syndicated loans to MAM and Proindicus remained secret until April 2016; the two companies have not been making repayments but the guarantees have not been called, so government has not been required to say if they will be honoured.

Opposition parties and @Verdade argue that by taking the three loans into the 2015 budget statement, government is repeating what it did with the Ematum bonds, and retrospectively taking responsibility for the loans and the guarantees. Venâncio Mondlane, of the Mozambique Democratic Movement (MDM), described the debts as ”illegal, illegitimate and immoral”, and claimed that, by mentioning them in the state accounts, the government “legitimates” the guarantees and “is sanctifying a satanic debt”, and “now we are all obliged to accept this debt”. Renamo MP Ivan Mazanga said “the government wants all Mozambicans to pay these debts”.

In his statement, de Rosario denied this, saying that including them in the budget statement was necessary “to guarantee control and monitoring of the guarantees by the Administrative Tribunal.”

Comment: Much hinges on the interpretation of debts being repaid if they are “proven to be in the public interest”. I interpret this to mean government will use the Kroll audit report to say that debts were not in the public interest, whereas MDM MP Venâncio Mondlane interprets it to mean the debts will eventually be defined as in the public interest and will be repaid.

De Rosario is probably being intentionally ambiguous. If the debt goes to court or arbitration, under the contracts this will be done in England. But a negotiation involving creditors, banks and Mozambique seems more likely, because their has been bad conduct on both sides which they will not want aired in public. For both domestic political reasons and prudent negotiating tactics, Mozambique may not want to go into those negotiations simply refusing to pay. But de Rosario’s statement seems at least intended to allow the reading that the government is publicly stating that the guarantees are illegal and unconstitutional, and that the loans themselves are “not in the public interest”. jh

@Verdade (12 Apr) is on http://bit.ly/2ohqyNa. (AIM En & Pt, Canal, O Pais 12, 13 Apr)

By Joseh Hanlon

Source: News reports & clippings