Mozambique: Country ‘asked China for interest holiday’ on $1.3B debt – minister | Lusa

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Mozambique: Country ‘asked China for interest holiday’ on $1.3B debt – minister | Lusa

4:57 CAT | 14 Oct 2020

File photo: Lusa

Mozambique has asked China for relief on interest payments on its debt to the Asian giant, which totals around $1.3 billion (€1.1 billion), and is awaiting a response, the minister of economy and finance, Adriano Maleiane, has said, following news that the process by which it is to secure relief on loans from other bilateral creditors is being finalised.

Mozambique has taken out “two types of loans” with entities in China: those from the government of China and those with banks in China, Maleiane said in an online debate on Tuesday as part of the annual World Bank meetings.

“We have also written to them,” he said of China, after outlining steps taken to seek debt relief from other bilateral creditors so that the country can free up resources to deal with the Covid-19 pandemic.

Maleiane spoke in a session in which the role of China was discussed, namely whether it would align itself with the Paris Club’s Debt Service Suspension Initiative (DSSI) with this the G20 – the world’s 19 largest economies plus the European Union – has already aligned itself. The DSSI was announced in April and is in place until the end of this year, with the possibility of an extension to next year.

The debts of African countries to China have prompted a number of analyses regarding the cost of dealing with Covid-19.

The Centre for Public Integrity (CIP), a non-governmental organisation based in Mozambique, has said that the country’s China debt is on a “frightening” scale as well as lacking in transparency. It is pressing the government to explain how it will manage the burden, in a context where the demands for Covid-19 spending are increasing.

The CIP carried out a study on which Lusa reported on Tuesday that estimates that the country owed China around $2 billion at the end of last year – a figure that is considerably higher than those now made public by the minister.

The CIP criticised the fact that official public debt reports do not include information on interest and repayments on its debt to China, “which represents a weakness for a document that is generally rich in content”. It notes that Mozambique has been borrowing from China since before 2010, but the pace picked up in 2016, with loans coming mainly from the Export-Import Bank of China.

In a comment to Lusa, Agostinho Mondlane, an economist at the Centre for Democracy and Development (CDD), another Mozambique-based non-governmental organisation, said that the contracts for the loans from China have been characterised by “opacity and no public information on the terms and conditions under which debts should be written off.” At the same time, some of the infrastructure financed with these loans is of dubious economic return, because no consistent feasibility studies appear to have been carried out.

A source from China’s embassy in Maputo said that his government would not publicly discuss aspects of debt agreements with the Mozambican state, refusing to go into details on the issue.

Mozambique had by Tuesday a cumulative total of 10,258 cases of the coronavirus that causes Covid-19, with 73 deaths associated with the disease and 7,880 patients deemed to have recovered.