Mozambique’s parliament ratified a law that provides state guarantees for previously hidden loans of two state-owned companies that sparked a debt crisis in one of the world’s poorest countries.
Lawmakers from the ruling Front for the Liberation of Mozambique approved the state accounts for 2015, which included guarantees for loans worth $1.12 billion that ProIndicus and Mozambique Asset Management took out in the prior two years. Opposition members left the legislature in protest when the vote was taken late Wednesday. The approval means the loans are now legal, in spite of a previous ruling by the country’s administrative court that they violated Mozambican budget law.
The International Monetary Fund and donors halted aid to the southern African nation when the loans were uncovered a year ago. The government in October told its commercial external creditors, whose debt includes another loan converted into a $727 million Eurobond earlier in 2016, it couldn’t afford to service the facilities and needed to restructure them.
A group of Eurobond holders has so far resisted starting negotiations with the government until an audit into the loans is published. Kroll Inc. is undertaking the probe that’s due for completion May 12, after the deadline for the report was extended three times by the government. They also demand to see outlines of a new IMF economic program as another condition.
ProIndicus and MAM have both failed to make payments on their loans.
The Eurobonds due 2023 fell by 1 percent to 71.46 cents to the dollar by 12:06 p.m. in London, the lowest since April 19.