Illegal debts will be restructured “one way or another” – central bank governor

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Illegal debts will be restructured “one way or another” – central bank governor

2:13 CAT | 20 Jun 2018

Photo: O País

Bank of Mozambique governor Rogério Zandamela denies that the strengthening of the net international reserves to US$3.2 billion has any connection with the non-payment of Mozambican debt services, as suggested by the IMF representative in Mozambique, Ari Aisen. Zandamela also says that the debts incurred by Proindicus, EMATUM and MAM will “be restructured one way or another”.

Earlier this month Ari Aisen warned that, although the central bank was accumulating significant net international reserves, which since December had increased by approximately US$3 million, “we must be cautious because part of the increase is due to the non-payment of some Mozambican debt services”, referring to the defaults on commercial debt contracted in violation of the Mozambican constitution and budgetary laws which led to the suspension of international aid and are preventing access to foreign financial markets.

“Not making payments on external debt obviously increases central bank reserves. The fact is that, in a situation where Mozambique is again inserted in the international capital markets, without delaying the problems of external indebtedness, we will have another reserve situation that we do not have now. It is difficult now to predict when this will be and how much of the (external debt) service will be carried out because it depends on the decision including the government of Mozambique and the international creditors,” Aisen says in the IMF’s latest report on sub-Saharan Africa.

Asked about the issue, Zandamela told reporters on Monday following a meeting of the Monetary Policy Committee, that “there is no relation” between Mozambique’s net international reserves, which currently amount to US$ 3.2 billion – enough to cover 7 months of imports excluding megaprojects – and the non-payment since the beginning of 2017 of the repayments and interest on the debts of state-owned Proindicus, EMATUM and MAM, which up to March amounted to US$636 million of arrears.

According to the Bank of Mozambique governor, the net international reserves might have seen “a smaller strengthening, but practically [the amounts] reflect the effort we made”.

Regarding commercial debts contracted with unconstitutional and illegal state guarantees, Zandamela was clear. “There is one thing that is agreed. The debt will be restructured one way or another. Nobody knows how much will be paid. Maybe nothing will be paid in the next five or ten years as part of that agreement.”

“There is an ongoing discussion between the government and the creditors, and when we reach a reasonable agreement, we will pay the debt, based on our ability to pay. No-one commits suicide to pay a debt, anywhere,” the head of the Mozambican central bank concluded.

By Adérito Caldeira

Source: A Verdade