Debt restructuring

IHS Markit consultants said on Monday that the probability of restructuring Mozambique’s public debt continuing until 2021 is now ‘high’ as the parties involved may want to wait until there is a new government in the country.

The problem goes back to the default on the payments of public securities issued in 2016 worth $727.5 million and the loans taken out by Mozambique Asset Management (MAM) and ProIndicus, worth over 1.4 billion that led to the country’s sovereign debt being considered ‘junk’ and the suspension of budge’support by international donors.

Nevertheless, the analysts at IHS Markit wrote that it was unlikely that the creditors (Credit Suisse and VTB bank) would take Mozambique to court, particularly as the debt was never officially recognised

“Any legal action taken by these banks will end up in the British courts and could be a lost battle as the government of Mozambique has still not recognised the secret loans, apart from the Ematum bonds, which were legalised when they were converted into sovereign debt”, the analysts added.

Regardless of the debt resolution scenario (the finance minister recently said he hoped to reach an agreement with the creditors by the year’s end), IHS Markit “maintains the opinion that a restructuring of the debt and the restart of assistance from the IMF and other donors are needed to put the country back on a more sustainable path”.