Mozambique: Deal with creditors puts country on ‘road to recovery’ – Capital Economics

Login

Register

http://www.clubofmozambique.com/

Mozambique: Deal with creditors puts country on ‘road to recovery’ – Capital Economics

7:31 CAT | 05 Feb 2019

File photo: Lusa

Capital Economics, a UK-based economic research consultancy, said on Sunday that a preliminary agreement between Mozambique’s government and public debt creditors has “put the country on the road to recovery,” but warned against weak growth.

“The negotiation of an agreement between Mozambique and the holders of debt securities in financial default has put the country on the road to gradual recovery, but growth will be weak until new gas projects are in operation in the middle of the next decade,” the Capital Economics analysts write.

In an analysis of various sub-Saharan economies sent to clients and which Lusa has seen, the analysts said that although the country’s interest burden fell in November following the announcement of the deal, “the country is not yet free of danger” as its indebtedness situation remains “precarious and the national economy is weak.”

The analysts also warned that budgetary policy will have to remain rigorous this year and in the next, which, “coupled with weak confidence, will make the country grow below 4%” in these two years.

In the long run, they conclude, “the growth rate will probably accelerate,” driven by natural gas development projects, which will go ahead despite the debt crisis.

In 2016, following the disclosure of some $2 billion in undeclared loans taken out by state-owned companies that made public debt unsustainable overall, and because of suspected corruption, various international donors blocked funding, forcing the country into financial default.

The so-called ‘hidden debts’ case has seen a former minister of finance of Mozambique, Manuel Chang, as well as three former employees of Credit Suisse and an intermediary of shipbuilding company Privinvest detained in different countries since 29 December 2018, at the request of US prosecutors. They believe that the hidden debts, which were guaranteed by the Mozambican state in 2013 and 2014, were the basis for corruption and money laundering aimed at enriching several suspects.

Source: Lusa