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Mozambique Eurobonds out of debt relief to build up investors confidence

To face the impact of Covid-19, Mozambique has asked foreign creditors for debt service relief, except for sovereign bonds in the so-called ‘hidden debts’ case, in order to avoid “instability” affecting a “good restructuring”, Mozambique’s Minister of Finance has announced.

“It took us a long time to discuss this restructuring. To be honest, it took us two years to negotiate with the private sector, and I think we got a good result,” Adriano Maleiane said on Tuesday.

Minister Maleiane was speaking on Tuesday in an online discussion during the 2020 Annual Meetings of the World Bank and IMF in which other speakers advocated equal treatment for public and private creditors concerning debt relief measures.

Maleiane underlined Mozambique’s particular context, saying the country was going to need a lot of private investment capital in the coming years, and so needed to boost confidence rather than create doubt.

However, if the holders of sovereign debt bonds (‘Eurobonds’) wished to “follow the G20 initiative, they are welcome”, he added, alluding to the ‘Paris Club’ formed by the 19 largest economies in the world plus the European Union, and its Debt Service Suspension Initiative (DSSI).

Concerning the DSSI, Maleiane said that, in order to best respond to the Covid-19 pandemic, debt cancellation measures should be discussed only following the suspension already announced.

Also read: Mozambique: Plans for Sovereign Wealth Fund outlined

“Suspension instead of cancellation raises more questions than answers,” because the state of the economy when payment obligations are due to be resumed remains unknown, he said.

During the exchange of ideas, Adriano Maleiane reaffirmed that Mozambique had taken steps to earn creditors’ confidence following the revelation of the state’s US$2.2 billion (€1.87 million) ‘hidden debts’ for maritime projects that never materialised, the subject of lawsuits in various parts of the world.

“We had a difficult time in the past, but we have been successful in restructuring our debt and we are now in a position to continue to finance the investments we need,” if only at “concessional” rates.

The Paris Club DSSI postpones interest and principal repayments on debt owed to bilateral official lenders from 1 May to 31 December 2020, with the possibility of further extensions. The IDSSI is currently expected to be extended at least until the end of 2021, conditional on the G20 leaders’ summit in November so deciding.

Mozambique records an accumulated total of 10,258 cases of Covid-19, 73 deaths and 7,880 recoveries.

Other participants n the debate were President of The World Bank Group David Malpass, Odile Renaud-Basso of the Paris Club, The World Bank’s Chief Economist Carmen Reinhart, Kevin Watkins, CEO of Save the Children, Eric LeCompte, Executive Director of Jubilee USA Network and Joyce Chang, J.P. Morgan Global Chair of Research.

Watch the debate in the video below:

Defusing Debt – Creating Comprehensive Solutions

Source: Lusa / World Bank Live via Club of Mozambique

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