Mozambique government will continue defaulting on illicit loans

Login

Register

http://www.clubofmozambique.com/

Mozambique government will continue defaulting on illicit loans

8:41 CAT | 29 Nov 2017

TVM

Mozambican Prime Minister Carlos Agostinho do Rosario announced on Wednesday, that while negotiations with the creditors are still under way, the Mozambican government will not repay any of the debts arising from the illicit loans that three security-related companies took from European banks (Credit Suisse and VTB of Russia) in 2013 and 2014.

Answering questions from deputies in the Mozambican parliament, the Assembly of the Republic, Rosario made it clear that the government will continue defaulting on these debts.

Also Read: Mozambique needs IMF, open to new probe on hidden loans – Maleiane

The loans to the three companies – Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) – amounted to over two billion US dollars. The banks lent this huge sum because the previous government, under President Armando Guebuza, guaranteed the loans in full.

These guarantees were illegal since they smashed through the ceiling on guarantees set in the 2013 and 2014 budget laws. They were also unconstitutional since a clause in the Mozambican constitution established that only parliament can authorise such debt.

Rosario told the deputies “the government is continuing to engage in dialogue with the creditors to guarantee that servicing the debt does not damage our work to make the government’s Five Year Programme operational”.

Also Read: Breaking: US investigates Credit Suisse, VTB and BNP Paribas for roles in selling Mozambique debt – WSJ

All three companies are effectively bankrupt and cannot possibly pay off the debts. The government made it clear in 2016 that it cannot and will not pay, and so urged the creditors to sit down with the government’s representatives and work out a debt rescheduling programme. The creditors have been reluctant to do so, with the result that the government has repeatedly defaulted on the debts.

Rosario said that while the government has been waiting for results from its talks with the creditors, and while the Attorney-General’s Office (PGR) has been investigating criminal aspects of the loans and their guarantees, no debt service at all has been paid.

Also Read: Analysts expect lengthy and complex negotiations with Mozambican creditors

Nor did the government intend to pay off any of the debt in 2018. Rosario said that no debt servicing arising from the guarantees for the Ematum, Proindicus and MAM loans has been written into the 2018 state budget which the Assembly will debate later this month.

Asked about the longstanding problem of overtime payments for teachers, Rosario promised “the government will honour its commitments and make the payments, as long as they are legal and the overtime is duly proven”.

Also Read: Mozambique’s rating captures risk of sizeable losses for private creditors from default – Moody’s

Source: AIM