Cyclone recovery: Mozambique needs US$3.2 billion and aid is less than expected, government says
File photo: Reuters
Consultancy firm Capital Economics warned on Monday that although the possible agreement between Mozambique and the sovereign debt creditors fosters confidence, it does not resolve the difficulties of the economy since it is worth only 4% of total debt.
“Even if the debt holders agree with the restructuring proposal, and the most recent signs suggest that they do, the debt problems in Mozambique are far from over,” the analysts at this British consultancy wrote.
In a comment sent to clients, and to which Lusa had access, Capital Economics wrote that “on the one hand, the agreement covers only the $727 million of sovereign debt issued in 2016 after the restructuring of Ematum’s corporate debt” and, on the other, the figure covers only 4% of the debt burden.
“The government continues to refuse to pay off the other debts, worth $1.2 billion, issued by state-owned companies, and is even suing Credit Suisse for its participation in these loans,” they added, noting, however, that a deal on the debt will be positive.
“An agreement will probably increase investor confidence and help the country regain access to international markets,” they said, “as well as being a “necessary, if insufficient, condition for a new International Monetary Fund programme.
Access to international financing, they explain, is a “pressing concern of the government”, which needs funds for the reconstruction of the country following two cyclones earlier this year, which should make the country’s GDP “have negative growth of about 1% this year”.
In the long term, they concluded, the evolution of the Mozambican economy remains dependent on the development of natural gas.
Mozambique’s government launched an international invitation to Ematum’s debt bearers (‘Eurobonds’) last week to accept the restructuring proposal presented in May by 6 September and implement it by the end of next month.
The proposal announced on 31 May with the agreement of 60% of the creditors needs the approval of 75% to be valid and, at the time, a deadline was set for the first day of September to obtain the additional permits (another 15%).
However, a ruling by Mozambique’s Constitutional Council (CC), issued on 4 June, considered the loan and sovereign guarantees granted by the state to Ematum null and void, forcing the government to hold new consultations, the economy and finance minister Adriano Maleiane explained.
Based on the court’s decision, civil society (which triggered the process) and several figures have insisted on the thesis that Mozambique should not pay the debt.Source: Lusa
Mozambique: Nyusi urged to declare state of emergency - AIM report
Covid-19: new study shows rapid action needed to prevent many deaths - By Joseph ...