Mozambique has taken “very important steps” in recent weeks to deal with the “hidden debts” inherited from the previous government, the Deputy Director of the Africa Department of the International Monetary Fund (IMF), David Owen, told reporters in Maputo.
He was speaking on Monday, after he met with Prime Minister Carlos Agostinho do Rosario.
The “hidden debts” refer to loans of over 1.1 billion US dollars from European banks (Credit Suisse and VTB of Russia) to the quasi-public companies Proindicus and MAM (Mozambique Asset Management) that were illicitly guaranteed in 2013/14 by the government of the then President Armando Guebuza.
Owen was pleased that terms of reference for an audit of Proindicus, MAM and the Mozambique Tuna Company (Ematum) have been agreed between the Mozambican Attorney-General’s Office, the IMF and the Swedish government, which is financing the audit. The US company Kroll has been chosen as the auditor. It has a reputation as the foremost company in the world for undertaking forensic audits.
Owen expected the contract with Kroll to be signed very soon, after which it would have 90 days to complete the audit.
The IMF official praised the “significant tightening of macro-economic policy”, and particularly the dramatic rises in interest rates announced by the Bank of Mozambique in October. This, he said, had led to the stabilization of the exchange rate of the Mozambican currency, the metical.
Such measures should be continued into 2017, Owen continued, but he warned of “the need to protect the poorest in society from the effects of fiscal adjustment”.
He noted that the government “has taken the first steps to talk to creditors about restructuring the private external debt”.
“We want to see the result of the audit, and progress in the discussions with creditors, so that we can be confident that Mozambique’s debt is set on a sustainable path”, said Owen.
But hedge funds who purchased Ematum bonds are creating problems for debt restructuring. They have formed a “creditors’ committee”, after taking alarm at the October warning by the Minister of Economy and Finance, Adriano Maleiane, that the country’s current debts are unsustainable and must be restructured.
The “creditors’ committee”, according to a report from the Reuters news agency, was formed by 60 per cent of the holders of Mozambique’s 2023 Eurobond. This is what remains of the bonds for 850 million dollars issued in 2013 Credit Suisse and VTB on behalf of EMATUM.
This debt has already been restructured once and the “creditors’ committee” object to a second restructuring. They have refused to negotiate until the audit of Ematum, Proindicus and MAM has been completed and published.
If the bondholders stick to that position, negotiations with the government could not start before February, at the earliest.
Asked about this obstacle, Owen declined to comment. “The creditors will take their own decision”, he said. “The IMF is not involved in discussions between the creditors and the government”.