Mozambique out of markets if Kroll expresses adverse opinions – BMI consultant

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Mozambique out of markets if Kroll expresses adverse opinions – BMI consultant

9:54 CAT | 02 May 2017

The BMI research analyst who follows the Mozambican economy told Lusa on Friday that the country would hardly be able to return quickly to international markets if the Kroll consultancy issues an adverse opinion in its audit.

In an interview with Lusa, David Earnshaw said that Mozambique would “almost certainly” be unable to access international financial markets in the near future and added that “the risks are worsened if Kroll issues an adverse or negative opinion in the audit report” which is to be presented in mid-May.

Earnshaw told Lusa that “in addition to the negative impact that the financial default had on the government’s relationship with international creditors, the way in which the executive conducted the process and addressed the negotiations made its reputation with the international investor community even worse”.

In particular, Earnshaw points out that the “government’s refusal to give priority to holders of public debt” vis-à-vis those who lent money to Mozambique Asset Management and Proindicus is proving “a real hindrance to progress for some kind of agreement or renegotiation of the terms” of the contracts.

The Mozambican government fell into financial default this year when the first instalment of almost US$60 million failed in the issuance of government bonds that resulted from the conversion of the obligations of the Mozambican Tuna Company (Ematum) to the value of US$727.5 million.

Subsequently, two payment instalments on loans to MAM and Proindicus failed as well, the government acknowledging that it did not have the financial capacity to meet its obligations and suggesting debt restructuring.

Asked about the impact of these defaults on investor sentiment, Earnshaw said that “the contagion of the debt crisis with investor sentiment has strongly affected all areas that require significant government involvement”, noting that gas, for example, is an exception because “the government has minimal intervention”.

BMI Research, a consultancy firm in the group that also owns the financial rating agency Fitch, also considers that the successive postponements of Kroll’s audit presentation, one of the demands of international donors to re-negotiate financial aid to Mozambique, is not a good sign.

“The fact that completion of the audit has been postponed several times may suggest that Kroll has faced some resistance from the government in accessing all the information it wants access to” Earnshaw said.

Source: Lusa