Mozambique: Parliament hears government on public debt – Notícias

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Mozambique: Parliament hears government on public debt – Notícias

12:53 CAT | 08 Jun 2016

Notícias (File photo)

The national assembly is meeting in extraordinary session today and tomorrow to analyze the matter of Mozambique’s public debt.

The session, convened by the parliamentary Standing Committee, follows the consensus reached by the three parliamentary parties and aims to give the government an opportunity to clarify the issue of public debt, especially with regard to loans contracted by state-owned companies with state guarantees.

The government, represented by Prime Minister Carlos Agostinho do Rosario, will explain the impact that the loans contracted by the Mozambican company Tuna (Ematum) Proindicus and Mozambique Asset Management (MAM) are having on the service of the country’s debt.

Ematum contracted loans of around US$850 million for the purchase of equipment and hiring of staff. Of this amount, the company owes US$350 million and the state US$500 million – about 59 percent of the loan entirely treated as sovereign debt.

Renegotiation of the Ematum debt has secured the extension of the payment deadline from five to seven years with annual payment of interest and the repayment of capital at the end of the seventh year. It was also agreed to reduce the debt service charge from about US$200 million per year to US$78 million, change from a variable interest rate to a fixed rate and incorporate the interest to be paid in September this year into the renegotiated debt, now standing at US$726 million with payments due to start in March next year.

Regarding Proindicus, whose 2013 debt stands at US$622 million, the government says that its feasibility study shows that the amount would be amortized over eight years and over the same period would generate revenue of US$1.7 billion dollars with operating costs of US$0.082 billion.

The debt payment deadline is five years and the first installment of US$24 million was due on 21 March 2016. The next US$119 million installment will be due on March 23, 2017.

The credit maturity is eight years with an optional extension of three years. The company operates air, maritime, fluvial and land integrated safety systems, but according to Minister of Economy and Finance Adriano Maleiane, the company has not yet closed any contracts for the provision of services.

The US$535 million loan obtained by MAM is to be repaid over four years starting with US$178 million on May 23 last.

This company provides various services in oil, mining and port construction, including the construction of a maintenance dock in Pemba and the repair of vessels on land and at sea, a floating dock, staff training and technical assistance.

With regard to total public debt, the government estimate is US$11.64 billion, of which US$3.6 billion is multilateral, US$4.4 billion bilateral, US$0.24 billion contracted by the Bank of Mozambique and US$1.6 billion the subject of state guarantees. The country has US$1.8 billion of domestic debt.

According to the government, the external debt sustainability ratio from 2013 to 2015 was positive when compared with the respective limits and taking into account the base scenario. In 2015, the figures were adjusted to reflect the depreciation of the metical against the dollar.

The executive notes that projections indicate that the debt-to-GDP ratio will improve in the long-term, taking into account the implementation of gas projects and diversification of the production base.

With regard to risk, and considering the average repayment times, the external public debt should be paid of in about 11.3 years. If the guarantees are activated, the debt will be repaid in 10.7 years.

Domestic public debt could be repaid in about 18 months.

Source: Notícias