Mozambique needs “Plan B” to ease debt

NGO-in-South-Africa_mozambique

A group of German NGOs has proposed that the UN could assist Mozambique in identifying a mediator to negotiate a settlement between the State and creditors

Jürgen Kaiser, co-ordinator of the German Erlassjahr coalition of non-governmental organisations advocating debt relief for poor countries, recently returned from Mozambique where he was investigating the crisis brought on by the so-called “hidden debt” scandal. While in the country, he presented the idea, which was well received by the Mozambican debt-monitoring NGOs.

At stake is the US$1.4-billion in loans guaranteed by the government to state-owned companies Ematum, Proindicus and MAM. These loans were not declared in the public accounts, leading the IMF and other donors to suspend aid.

“Mozambique cannot easily get out of a situation like this the traditional way”, says Kaiser, as old debt relief initiatives no longer exist. “Also because the creditors of the so-called Paris Club – which could theoretically create opportunities for debt relief – are no longer the major creditors. These are now the bond holders or countries that are not part of the Paris Club, like China”.

Mozambique’s public debt has been estimated at €10-billion, or more than 70% of the country’s GDP. Of this, almost €9-billion is foreign debt, and both figures could increase before the end of the year, rating agencies say.

“Plan B” up the sleeve:

Currently, there is “no mechanism to produce debt relief in a consistent and targeted way”, Kaiser said, and at an international forum held in Maputo on 22 and 23 June, the German NGO presented the idea that: “parliament and civil society, but also the government – especially the Ministry of Finance – could unite to develop some kind of ‘Plan B’ for Mozambique”.

This plan would be based on the so-called roadmap of the United Nations Conference on Trade and Development guide published in 2015 to deal with sovereign debt.

“One hopes that it is not necessary, but should it be used, it could be a relatively straightforward process for Mozambique to openly and transparently negotiate debt relief with all its creditors, with the support of the UN”, Kaiser explains.

International mediator:

While the debate in Maputo focuses mainly on the question of who was responsible for the hidden debts, the idea of UN intervention was welcomed by the Mozambican Debt Group (GMD).

“From the point of view of the agreements with the IMF and bilateral partners – which were violated – it may also make sense for there to be external mediation along with our own”, says GMD’s Eufrigínia dos Reis.

The general co-ordinator of the debt-monitoring NGO considers the notion of having an international figure as a mediator “productive”, highlighting that it could even bring “more benefits to the country from the point of view of restoring trust and self-discipline, considering that the error was internal”.

The head of the GMD, which is part of the civil society Budget Monitoring Forum (FMO), is aware that – in the short-term – it will be difficult to find a solution to the crisis, but believes in the “good faith” of international partners.

She also calls for more transparency to “clean up the image” of the country. “We are a very wise people. If this [irregularity] was committed by a group, it would be very serious if all Mozambicans were made to pay for it”, she says.

Dos Reis draws attention to the statement signed by all the international forum participants. “Just the fact that we achieved a joint statement already shows the seriousness and commitment that Mozambicans are adopting in the face of the circumstances”, she concludes.

Africa’s rising debt:

Mozambique was one of the major beneficiaries of historic debt relief in 2005, when it was still recovering from a 16-year civil war. At that time, under the Heavily Indebted Poor Countries support initiative, the international community wrote off Mozambican debt totalling US$3-billion.

However, since then, Mozambique has returned to a trend of accumulating debt.

The crisis in Mozambique is mainly linked to two key factors: “one is the strong inflow of foreign capital due to low interest rates; and the other is the need for large investments in the sectors of infrastructure and exploitation of natural resources”, says Kaiser.

After the discovery of gas reserves in the north, the country invested substantial revenue coming from this sector, and this created problems for the economy, he adds. Indeed, countries that have invested heavily in the exploitation of resources and are highly dependent on foreign capital are in the same situation. According to Kaiser, this is the case of neighbouring Zambia, “grappling with a similar social, political and economic crisis”, not to mention the case of Ghana, where despite the discovery of oil on the coast the increase in debt is seen as “alarming”.

The debt of several African countries is getting closer to the levels of 2005, when the pardon reached US$100-billion.

Source: Deutsche Welle
For insight; follow our blog at: https://yukonservice.wordpress.com

Clearing Agent in Mozambique | Top Website | http://www.yukonservice.com | info@yukonservice.com

Yukon Services Clearing Agent License Holder
Yukon Services en Maputo | Clearing Agent in Mozambique | Top Website | Biggest English Portal | http://www.yukonservice.com | https://yukonservice.wordpress.com |
Hydrocarbon Logistics Centre | The Pemba Logistics Base | Nigerian Company Orlean Invest | Portos de Cabo Delgado (PCD)

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s