Mozambican aid program may go ahead even with country in default

Login

Register

http://www.clubofmozambique.com/

Mozambican aid program may go ahead even with country in default

12:50 CAT | 06 Feb 2017

The IMF told Lusa that Mozambique’s default does not prevent a possible Fund support program, and discussions would continue in the first half of this year.

“Discussions on a new and possible IMF-supported program will continue during the first half of this year,” a Fund spokesman said, noting that it was not possible to give more details on the progress and deadlines of the talks.

The IMF’s press office statement to Lusa comes after the deputy director of the communications department, William Murray, last week said in a press conference that the Fund could provide financial support to countries with arrears.

“The Fund can provide financial support to member countries with external arrears to private creditors, provided that prompt Fund support is considered essential for the successful implementation of the member’s adjustment program, and the member is pursuing appropriate policies and making a good faith effort to reach a collaborative agreement with its private creditors,” William Murray said at a regular press briefing last week in Washington.

Asked by Lusa about who evaluates the country’s economic efforts, the press office responded that “this is a determination by the board of directors,” meaning in practice that the IMF can move forward with a financial aid program to Mozambique even if the country is in arrears, that is, in financial default.

On Thursday, the Fund also issued a press release saying it did not express any opinion on Mozambique’s decision not to make the January repayment installment on the US$727 million in sovereign debt securities issued in April of last year.

“The IMF has not expressed any point of view on the country’s debt repayment priorities,” said Permanent Representative Ari Aisen, noting that William Murray “merely clarified the IMF’s policy on financial support to its Member countries with external arrears [amounts] to private creditors”.

Mozambique officially fell into financial default on Friday, after its tolerance period to repay US$60 million the January installment of the public debt issued last April ending on Thursday. The African country thus becomes the first on the continent to fail to make a debt repayment since Ivory Coast was unable to honor its financial commitments in 2011.

The failure to pay has been confirmed to the Bloomberg financial information agency by several analysts and holders of public debt securities and comes as the natural consequence of the announcement by the Mozambique government itself, two days before deadline, that it would not pay almost US$60 million due to holders of US$27.5 million in sovereign debt issued by Mozambique in April of last year.

The Ministry of Finance confirmed on January 16 that it would not pay this month’s US$59.7 million installment on sovereign debt maturing in 2023, thereby defaulting.

“The Ministry of Economy and Finance of the Republic of Mozambique wants to inform the holders of the US$726.5 million maturing in 2023 issued by the Republic that the payment of interest on the notes, worth US$ 59.7 million, which is due on January 18, will not be paid by the Republic,” the statement read.

Source: Lusa