Debt campaigners demand action as Mozambique defaults

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Debt campaigners are urging Credit Suisse to “come clean” about the facilitation of secret loans to Mozambique and for Mozambican leaders and officials to be held to account. The Mozambique government has said it will not make a US$59.8-million interest payment that was due on 18 January.

On Wednesday 18 January, campaigners from the Jubilee Debt Campaign handed in a call from 900 people for Credit Suisse to “come clean” about its facilitation of secret loans to Mozambique. The campaign group is supporting calls by Mozambique civil society organisations for the Mozambican people not to have to repay the loans, and for Mozambique government officials and lenders responsible to be held to account instead.

The hand-in came the day before Mozambique was expected to default on a US$59.8-million interest payment. Campaigners delivered the petition to Credit Suisse’s offices in Canary Wharf, demanding that they release all the information they have on the loans and cancel any debt still owed to them.

Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said: “The hidden loans to Mozambique have been devastating for the people of this southern African country. As usual, the poorest people are suffering the most, with rampant inflation in basic goods and cuts to essential public services because of the debt crisis.

“The Mozambique parliament never agreed the loans, so it should refuse to pay them”.

“All those responsible need to be held to account, both the officials in Mozambique who signed-off on the loans, and the banks which facilitated them. Credit Suisse and VTB should come clean about their roles, including by revealing who now owns the debts and what they were sold for, and by publishing the due diligence they conducted before agreeing the loans”.

In April 2016 it was revealed that Credit Suisse and Russian bank VTB arranged loans totalling US$1.1-billion to two companies in Mozambique with state guarantees. This was in addition to a US$850-million bond issuance arranged by Credit Suisse and VTB to another company, on which the interest payment is due on 18 January (following a restructuring of payments which took place in 2016). None of the loans were approved by Mozambique’s National Assembly, breaching the country’s Constitution.

The debts, alongside falling prices for Mozambique’s commodity exports and the high value of the dollar, have created a debt crisis in Mozambique. It is suspected that Credit Suisse and VTB have sold on most, if not all, of the loans. The Paris Club group of western government creditors met on 12 January to discuss Mozambique’s debt crisis. The Financial Conduct Authority in the UK has been reported to be investigating both Credit Suisse and VTB.

Mozambique’s crisis highlights the major lack of transparency around lending to governments by UK-based banks and financial institutions. Jubilee Debt Campaign are also demanding that the UK government bring in new regulations requiring all loans issued to governments or with government guarantees under English law to be publicly disclosed at the time they are given.

Both Credit Suisse and VTB have failed to respond to Jubilee Debt Campaign.

Source: One World

IMF awaits results of negotiations between Mozambique and creditors  

The IMF is awaiting the results of the negotiations between Mozambique and creditors after the government declared that it is unable to pay a US$59.8-million interest payment. “The implications will have to be seen over time. We hope there will not be many”, said the IMF representative in Mozambique, Ari Aisen.

According to the IMF representative, “what is important is that these discussions with creditors can lead to a solution that will bring Mozambique’s debt to a sustainable position in the coming years”.

Aisen said that the IMF’s relationship with Mozambique “is very positive” reiterating the IMF’s desire “to contribute to the country’s macro-economic stability and to its inclusive growth”.

Source: Portugal Digital

“Failure to pay debt pushes us into bankruptcy” – Antonio Francisco

Academic António Francisco does not understand how the government could fail to repay a debt which was renegotiated less than a year ago. According to Francisco, if the country were a company it would be dissolved, much like O Nosso Banco.

Francisco was reacting to the announcement that the State will fail to pay a US$59.8-million interest payment that came due on 18 January.

“What I find worrying is that, in fact, the non-payment of this debt arises less than a year after being renegotiated, and one has to ask what renegotiation this was, because the government had information about the possibilities of non-payment. The creditors did not; and they did not even know that there were other hidden debts – but the government knew. So the government initiated the renegotiation, changed the deadlines and the interest rates, and when the first payment came due, the government says it is not in a position to pay”, says the scholar.

Francisco, who is also a researcher at the Institute of Social and Economic Studies (Instituto de Estudos Sociais e Económicos, IESE), believes that the failure to pay the public debt provides room for a greater discredit on the part of the Mozambican State. This could push the country into a situation of bankruptcy.

“Obviously, this pushes us into bankruptcy. But, the country is not a company. If it were like a company or a bank, the solution would be relatively easy, like what was done by the Banco de Moçambique when it closed and liquidated O Nosso Banco. But a country cannot settle this way”, he said.

The academic says that this noncompliance could accelerate discussions with the creditors (in order to find new payment modalities more favorable for the current weak financial capacity of the government). But he believes that it compromises the country’s image enough to delay the recovery of international donor confidence and the resumption of growth.

Source: O País
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