Mozambique’s legal and financial advisers in the public debt restructuring process have not met with investors for more than a month, rendering the deadline set by the government to complete the process unfeasible.
According to the Wall Street Journal, for more than a month the legal and financial advisers chosen by Mozambique to negotiate the restructuring of the public debt – the British companies Lazard Frères and White & Case LLP – have not spoken to the investors, although preliminary discussions with banks Credit Suisse and VTB to define the terms of future negotiations are underway.
The US financial newspaper, which cites as sources people familiar with the process, adds that among the largest Mozambican public debt holders, who have formed a committee of bondholders to defend their interests, are mutual-fund managers AllianceBernstein LP and Franklin Templeton Investments, alongside hedge funds Greylock Capital Management, NWI Management and Pharo Management.
The Wall Street Journal article arose at a time when the government’s deadline for this process was nearing to an end, since at the end of October 2016, when a presentation was made to creditors in which the country recognized the inability to pay the debts, the idea was that the debt restructure would be completed by the end of December 2016.
Mozambique in “sovereign bankruptcy” say economists
Economists say that Mozambique has entered into sovereign bankruptcy as a result of the government being unable to make repayment installments on the so called hidden loans valued at US$1.4billion in May this year.
Economist António Francisco says that in order to prevent the situation from deteriorating further, the Mozambican government must work to restore the stability in the country, but this seems unlikely in the near future.
“Practically speaking, Mozambique has already entered a situation of sovereign bankruptcy”, the economist says, since that the government failed to make a repayment last May 2016, and has another installment due in January 2017.
This means that the country is “not managing to honor its commitments” with international lenders.
Economist Mário Sitoi says Mozambique should not even consider not honoring its commitments to creditors, because “this would be very harmful for the country”, while Mozambican Finance Minister Adriano Maleiane says that the government is treating the debt issue with the seriousness it deserves and intends to resolve the matter as soon as possible.
Francisco nevertheless criticizes the government’s strategy of encouraging production, given the high cost of living.
Source: VOA Português
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