Mozambique’s mounting debt crisis that has see western donors cut their funding to the South-East African nation has pushed it to seek closer ties with China, which through state-owned China Daily termed the gas producing nation as a “rough diamond” and a “brother”.
A fall in commodity prices has left the coal and gas producer exposed with it debt levels (compared to GDP) rising from just 42 percent a years ago to nearly 80 percent.
The discovery of hidden loans amounting to over $1.1 billion in April by the International Monetary Fund (IMF) has further jolted western investors and donors who have reacted swiftly by holding back their funds from the country.
Other previously unacknowledged loans have since been revealed, bringing Mozambique’s surprise debt toll to at least $2.32 billion, according to Chatham House.
The country’s total public debt currently stand at $11.64 billion, of which $9.85 billion is owed to foreign investors, according to Finance Minister Adriano Afonso Maleiane
The cash-strapped nation has said it won’t be able to honor a $178 million debt-interest repayment due in May, pushing yield on its Eurobonds to a record high, Bloomberg report.
In the wake of these revelations rating agencies have downgraded Mozambique.
Meanwhile, Mozambique’s President Filipe Nyusi is currently on a charm offensive week-long visit to Beijing, China, with other high ranking government officials, to try and cement ties with the Asian giant after fruitless visits to Brussels and Washington, DW reported.
“I want to point out that China is one of our most important economic partners,” Nyusi said in the eastern province of Jiangsu where he praised trade relations with Beijing.
A meeting with Chinese President Xi Jinping is scheduled in the coming days.
China pledged to extend a $5 billion in soft loans in two years to the South-East African nation as a “priority partner”, during the Forum on China-Africa Cooperation (FOCAC) in South Africa in December 2015, where Xi pledged up to $60 billion to the African continent in the form of soft loans and development aid.
China has previously engaged in big construction projects Mozambique, as it has done in many other African countries. Some of the projects in the nation include a power line between the provinces of Zambezia and Nampula in the north worth $400 million, Streets, power lines and railway tracks.
Even as the debt crisis unfolds, the Chinese government signed a grant on May 5, worth $16 million for Mozambique to buy 80 buses for public transport and to dig 200 boreholes for drinking water.
Some analysts have predicted that this show of willingness by Beijing to step in and support its “brother” in crisis will increase its influence in the country’s vast coal and gas reserves that are yet be tapped, Global Construction Review reported.