Mozambique: Govt Working to Restore Confidence – Nyusi

Brussels – Mozambican President Filipe Nyusi said in Brussels on Friday that the government is working at top speed on the political and diplomatic front to explain, with transparency, the country’s public debt, in order to restore the confidence of creditors and cooperation partners, badly shaken by the revelation that over a billion dollars of government guaranteed loans had not been disclosed to the International Monetary Fund (IMF).

Speaking to reporters at the end of his two day working visit to Belgium and to the Brussels-based institutions of the European Union, Nyusi said the country’s partners have recognized the merit in the way the Government is seeking to deal with the undisclosed debts.

“We are facing the problem frontally”, he said. “We are opening doors so that things can be understood”.

It is now clear that in the closing years of the government headed by Nyusi’s predecessor, Armando Guebuza, there was a massive expansion in the public debt. But only one of these government guaranteed debts was publicly known – this was the 850 million US dollar bond issued by the Mozambique Tuna Company (EMATUM) in 2013, which has now been converted into sovereign government debt maturing in 2023.

But in early April, thanks largely to an article in the “Wall Street Journal”, it became known that there were at least two other very large loans, guaranteed by the government, which had never been reported to the IMF, let alone to the Mozambican public.

One of these debts was contracted by the state company Pro-Indicus, apparently to purchase boats and radar systems for maritime protection. Finance Minister Adriano Maleiane put this debt at 622 million dollars – but other figures, of up to 950 million dollars, have been mentioned in some reports.

There is also a loan for at least 500 million dollars for the Pemba Logistical Base, under construction in northern Mozambique to serve the needs of the nascent hydrocarbon industry. This remains shrouded in mystery since, when Guebuza laid the first stone for the base, in August 2014, there was no mention of any government guaranteed loan. The Base is operated by a public company, Ports of Cabo Delgado (PCD), but has been sub-leased to ENH Integrated Logistics Services (ENHILS), in which the foreign investor is the Nigerian company Orlean Invest. At the time, it was widely assumed that Orlean Invest would be putting up the money for developing the base.

The undisclosed loans led the IMF to cancel a mission to Mozambique and to suspend the second instalment of a 283 million dollar loan from the Fund’s Standby Credit Facility. Prime Minister Carlos Agostinho do Rosario was then sent to Washington for talks with the IMF and the World Bank

Nyusi declared that transparency is a necessity in matters of public finance, and insisted that “debts must be sustainable”.

With the government working rapidly to restore confidence, he was optimistic that the government can rely on the collaboration of its partners. He said they are willing to collaborate and have encouraged the government not to be intimidated by the problem.

“We are finding cooperation from the IMF”, he said, “to see if we can reach a solution rapidly and return to normal aid. More than ever, we are interested in ensuring that those who want to help, can have a space where they can assist with confidence”.

All the country’s partners are interested in helping Mozambique overcome the problem, he said. “The interest is constructive”, he added. “The important thing is to create conditions so that the problem can be solved”.

Nyusi made it clear that the government is banking on restructuring the hitherto undisclosed debts, just as the EMATUM debt had been restructured. That restructuring bought the government an extra two years in which to pay off the EMATUM bondholders, but at a much higher interest rate (10.5 per cent).

SOURCE: Agencia de Informacao de Mocambique.