Mozambique’s debt sustainability will depend on successfully restructuring or walking away from the ‘hidden debts’, the International Monetary Fund (IMF) said today in its latest update on the country’s economy.
The restructure of the country’s eurobond, concluded at the end of October, is “broadly in line with the baseline scenario in the debt sustainability analysis published in April,” the IMF said in Maputo today, adding that Mozambique needs “to secure additional debt relief from international private creditors,” referring to the creditors of the loans taken out by security companies Proindicus and MAM, in order for the country’s external debt to become sustainable.
Mozambique is refusing to pay the Proindicus loan, arranged by Credit Suisse, and is contesting its validity in courts in London. Negotiations have been taking place with Russia’s VTB bank regarding the loan it arranged for MAM, but the process may be complicated by accusations that VTB bankers also accepted bribes. Former Credit Suisse banker Andrew Pearse testified in court in New York last month that the top VTB banker who worked on the deal, Makram Abboud, received a $2m bribe from the company supplying the contracts, Privinvest.
The IMF’s Ricardo Velloso, who has led a staff mission to Mozambique that began on 6 November, said he “welcomed the ongoing efforts by the Attorney-General’s Office to bring accountability to the issue of the previously undisclosed loans,” but said the IMF does not get involved in bilateral negotiations between member countries and their creditors.
He said Mozambique’s economy is set for a “strong rebound” in 2020, with growth expected to hit 5.5% compared with just 2.1% this year, supported by post-cyclone reconstruction, a recovery in agriculture, continued easing of monetary conditions, and the government paying long-standing debts to suppliers. Construction and other activities should also be boosted by investments in the LNG megaprojects, he said.
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