Good news for Mozambique, which finally hopes to breathe after reaching a principal agreement with some of its creditors to restructure a suffocating debt.
In 2016, Mozambique contracted a bond issue, in the form of Eurobonds worth $726.5 million, to be repaid by 2023 at the latest. This money should be used to repay a first debt contracted in 2013.
Just in 2017, Maputo reported its inability to repay interest worth $59.7 million as of January 18, 2017.
So what are the terms of the agreement in principle between Mozambique and its main creditors? To clear its debt, Mozambique may instead get more debt.
(a) It will issue a new, bigger loan: $900 million as against $726.5 million.
b) But the repayment term is extended by 10 years from 2023 to 2033.
c) The interest rate decreases to 5.8% from 10.5%.
Mozambique finds its self in a vicious circle. In 2013 the country contracts via a state-owned company, an 850 million dollar eurobond, to finance the purchase of fishing boats, thanks to a state guarantee which had inflated invoices.
A back door move to also acquire 6 military patrol boats out of 20 boats ordered.
How have banks in Switzerland and Russia, among others, been lax and complacent in granting huge sums of money without worrying about the profitability of the project and the possibility of recovering their investment? Two years later, the question haunts the opposition members.
“I also think that the banks have their share of responsibility. I am talking about Credit Suisse and VTB, which give money to African governments, to corrupt regimes in Africa, without really trying to find out if this money is being used for the benefit of the people of these countries, to contribute to the projects of this country, or if this money is being used for illegal purposes, for the private purposes of these leaders, or for inconceivable purposes.” Ivone Soareso, leader of the parliamentary group of the opposition party Renamo in Mozambique.
The guarantee provided by the authorities at the time is clearly illegal.