International Monetary Fund (IMF) admits program with Mozambique in ‘debt distress’, but waits for creditors

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International Monetary Fund (IMF) representative in Mozambique Ari Aisen says that there may be a new program while the country is still in debt distress, but warns of a “cooling” of creditors in relation to debt restructuring.

“There is a possibility, but obviously we are waiting for negotiations between government and creditors to show a little more clearly how discussions are progressing,” he said.

The IMF representative was speaking in Maputo at a conference on economic prospects for Africa and Mozambique.

Without giving a number, Aisen said that, while it was not possible to immediately return to a “70 or 80 percent”, the relationship between public debt and GDP “has to return to moderate territories over a number of years”.

Mozambique’s public debt has risen from 40 percent of gross domestic product (GDP) in 2013 to around 120 percent, according to Mozambique’s central bank.

“We want to see the public debt trajectory actually declining” and also see the country’s financial health strengthening on other “important indicators”, including the ratio of debt to exports and tax collection.

In Wednesday’s presentation on economic prospects in Mozambique, Aisen said that the state had contracted new external loans, despite being bankrupt, and that this type of action “could affect creditors’ appetite for debt restructuring”.

He admitted that there could be a “cooling off” in the process.

The state has already defaulted on a repayment of bonds covering Ematum debt and two other public companies (MAM and Proindicus) have also declared themselves unable to pay, with debt restructuring negotiations ongoing.

The three companies are responsible for US$2.2 billion of debt contracted between 2013 and 2014 from foreign banks with government guarantees that had not been approved in parliament or registered in public accounts.

When the scandal broke out in April 2016, the IMF and a group of 14 international donors froze direct support to the state budget and demanded an audit as a prerequisite for resumption of support – an audit already delivered to the Attorney General’s Office (PGR) of Mozambique but whose disclosure has not yet been scheduled.

The country ended 2016 with inflation at 25 percent, according to the Mozambican National Statistics Institute, and the metical ended the year among the ten most depreciated currencies in the world, losing about a third of its value – a trend which has since been reversed.

Source: Lusa

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