Capital Markets Debt Finance Government Justice Mozambique

Mozambique: Debt decision complicates access to markets – EIU

The Economist Intelligence Unit (EIU) said that the Constitutional Council’s decision regarding the nullity of MAM and ProIndicus’ debts makes it difficult for Mozambique to access international financial markets.

“The decision may complicate Mozambique’s access to external finance,” write experts from the economic analysis unit of the British magazine The Economist.

In a commentary on the recent Constitutional Council decision on the nullity of loans taken by public companies Mozambique Asset Management and ProIndicus, sent to clients and accessed by Lusa, the analysts say that “the judicial decision declared the loans organised by Credit Suisse and VTB to be null and void, and may give more weight to the government’s efforts to challenge the validity of state guarantees given to the loans”.

The government has stated that the state will only pay back part of the loans, and the rest will be the responsibility of the companies, Economist analysts recalled, adding that “Credit Suisse and VTB have argued that the Mozambican government is responsible for the payments”.

The Economist’s analysis unit said the debt of US$1.5B to finance the 15% stake of the National Hydrocarbons Company in Area 1 may thus be more difficult, but “the recent collapse in economic activity and investor confidence should delay these efforts.

The Mozambican Constitutional Council considered all acts relating to loans taken out by the state for the companies Proindicus and MAM null and void, according to a ruling released on 12 May, related to the case of hidden debts.

The decision was identical to an earlier one taken in June 2019 when the body was called to deliberate on the loan to Ematum.

Overall, the funds used on behalf of the three Mozambican public companies (Ematum, MAM and Proindicus) total US$2.2B (about €2B) from the hidden debt scandal, still under judicial investigation – and with the US and Mozambique disputing in South Africa the extradition of former Finance Minister Manuel Chang.

Source: Lusa via Club of Mozambique

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