(2015-06-22) Mozambique’s former Prime Minister, Luisa Diogo, has expressed serious concern at the level of the country’s indebtedness, and particularly the government guarantee for the 850 million US dollar loan that the Mozambique Tuna Company (EMATUM) took on the Eurobond market in 2013.
In an interview published in the latest issue of the independent weekly “Savana”, Diogo said “Something went wrong in the EMATUM study, in structuring the debt at such a high level, because it’s not a small debt. There was a failure in structuring the debt”.
“This debt is very heavy, that’s the reality”, she added. “We saw the Minister of Economy and Finance (Adriano Maleiane) present the situation in parliament. And, as economists, and with the access to information that we have, we feel that the debt is heavy”.
“When we accept a debt, we must always bear in mind what are the sources for paying it, and when a private company with public entities within it (EMATUM is technically a private company), brings a package for guarantees from the State, the sustainability of the State debt must be analysed”, she said. “We must always pose the worst scenario, which is when the company is unable to pay. For a company to pay a particular sum, it must be structured in a particular way, and know how much it has to produce, if the debt is to be paid”.
Diogo said that if, for example, a company has to pay 200 million dollars a year in debt servicing “then it must produce at least 700 to 800 million dollars a year”. The EMATUM debt is to be repaid over seven years, with a two year grace period, and an interest rate of LIBOR (London Inter-Bank Offered Rate) plus 6.5 per cent. Yet the most optimistic forecast (from the government) is that when the EMATUM fleet is fully operational, it will bring in revenue of only 196 million dollars a year.
Diogo advised letting Maleiane find a solution. “We cannot throw stones at the solution he finds”, she said. “If he does find a solution, it’s because he studied it with the government economic team. It’s the best solution they found so that the country continues to work. We have to give him room to find the best solutions”.
There was no way of scrapping EMATUM, since it was now part of the Mozambican economy. “The credibility of that company, from the point of view of paying the debt, a debt guaranteed by the state, is the credibility of the state itself”, Diogo stressed. “So the State must accept it”.
Diogo, when she was Finance Minister, had been at the head of the team negotiating the cancellation of Mozambique’s foreign debts, in the framework of the HIPC (Heavily Indebted Poor Countries) debt relief initiative, but she was afraid that those gains were now being lost.
“Once again, I am beginning to have nightmares about the Mozambican debt”, she told “Savana”. She looked at the current situation “with a great deal of concern and apprehension”.
“We are still some years away from the natural gas flowing (referring to the gas fields in the Rovuma Basin in the north of the country), but we already have a debt, and the debt service must be paid immediately”, she said. “What is in question here is the quality of the debt. There are countries which can go for a commercial debt, with a year of grace and five years to repay. Mozambican still can’t. It can take a little debt under these conditions, but not much”.
“I think we have gone off the rails a bit”, she warned. “We have to use this term: we have derailed”.
She expressed her solidarity with Maleiane, and was confident that he would find the best solutions to see the country through the difficult years before the huge reserves of gas come on stream. When the gas revenues were available, Mozambique could pay its debts “with greater tranquility”.
“But there are going to be difficult moments, particularly this year, which is not at all an easy year from the budgetary point of view”, Diogo said.
Commercial debt rather than soft loans was an act of violence, she stressed. “The country can’t stand it. When I say it can’t stand it, I’m not saying it won’t pay. It ends up paying one way or another, but it will delay the building of classrooms and of health centres”.
“The debt must be restructured”, Diogo stressed, “so that the country can continue to invest correctly in the areas where it ought to invest”.
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