“Mozambican government to give top priority to sovereign debt” – Chatham House

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“Mozambican government to give top priority to sovereign debt” – Chatham House

3:00 CAT | 14 Jan 2019

in file CoM

The Director for Africa at the British Royal Institute of International Relations, Alex Vines, has told Lusa that the US prosecution in the matter of Mozambique’s hidden debts will force the government to focus on repaying sovereign debt.

“The US indictment is having a significant impact on Mozambican politics, but it is too early to say whether this will strengthen or weaken President Nyusi and its ultimate consequences on domestic policy,” Vines said, adding that the first consequence is for the government to prioritise and “focus on the repayment of debt securities that are under negotiation with creditors, leaving the other two syndicated loans to one side”.

If former Mozambican finance minister Manuel Chang, currently detained in Johannesburg awaiting a court decision, is extradited to the United States, “his allies in the National Assembly may oppose any payment, using sovereignty as justification,” he added.

According to Vines, the second of the three main impacts of Chang’s detention, is that the Mozambican Liberation Front (Frelimo, the party in power) will find it more difficult to use public enterprises to finance the party. The third is “the visibility and political ambition of prominent individuals associated with the public debt scandal”.

Vines says there is significant public discontent about the debt crisis, and this “partially explains the change of vote for Renamo in the municipal elections of 2018”. “It is a clear warning to Frelimo that an important part of the electorate that is changing its support to Renamo as a form of protest at [Frelimo’s] inability to hold those involved in the scandal accountable.”

President Nyusi can still “turn these allegations to his favour and regain the support of voters if he shows that he supports judicial efforts to hold Frelimo leaders who have abused their position during the previous government’s mandate in this debt scandal accountable,” Vines concludes.

Mozambique’s US$2.2 billion (€1,920 million) ‘hidden debt’ accounts for half of the country’s total debt cost, although it accounts for less than 20 percent of the total in absolute terms, and is under investigation by US authorities on suspicion of corruption, which led to the detention of the former Mozambique finance minister.

Besides Chang, the US court investigation has led to the arrest of three former Credit Suisse bankers in London and a Lebanese Privinvest intermediary at New York airport.

The ‘hidden debt’ is the term used to describe the loans made at the beginning of this decade to three public companies: the Mozambican Tuna Company (Ematum), Mozambique Asset Management (MAM) and ProIndicus, three entities under the protection of the Ministry of Defence and proposing maritime safety projects financed by Credit Suisse and Russian bank VTB.

Eighteen defendants, both public servants and others, have been indicted in Mozambique on charges of abuse of office or function, abuse of trust, embezzlement and money laundering, in the course of the process.

Source: Lusa