Mozambique confirms state firm missed debt payment deadline

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Mozambique confirms state firm missed debt payment deadline

5:44 CAT | 25 May 2016

In File Club of Mozambique / A view of Maputo

State-owned Mozambique Asset Management (MAM) missed a May 23 deadline to make a $178 million loan repayment but remains in talks with creditors about rescheduling the debt, finance ministry spokesman Rogério Nkomo said on Wednesday.

Nkomo told Reuters that a sovereign guarantee behind a $535 million loan arranged by Russia’s VTB Bank for MAM would not become an issue until the talks had concluded.

“We have no control over the operation being carried out by the company with the creditors,” he said.

Ratings agency Fitch downgraded the war-scarred southern African nation’s credit to ‘CC’ from ‘CCC’ on Monday, indicating that “a default of some kind appears probable”.

Shortly afterwards, a finance ministry source told Reuters that MAM had missed the loan payment and the government had failed to honour its guarantee.

Fitch’s decision was based largely on the emergence last month of at least $1.35 billion in secret borrowing for defence and maritime infrastructure. Slowing growth and delays to the start of offshore gas production have added to Mozambique’s cashflow problems.

The clandestine borrowing has pushed Mozambique’s total foreign debt to $9.86 billion to 80 percent of GDP – a ratio that is climbing as its currency, the metical, falls because of a collapse in investor confidence.

The VTB loan had been earmarked for the construction of shipyards in the capital, Maputo, and the northern town of Pemba to service the former Portuguese colony’s nascent but potentially huge offshore gas industry.

The shipyards have not materialised, and International Monetary Fund managing director Christine Lagarde said last week the secret borrowing was “clearly concealing corruption”.

Source: Reuters