Business of Mozambique says public debt will increase costs

The Confederation of Economic Associations of Mozambique (CTA), representing the country’s entrepreneurs, said yesterday that the increase in public debt will make financing more expensive, and called on the government to reveal the true magnitude of the problem.“There is no doubt that the implications for company activity are negative, because the country’s image is tarnished by these revelations. The cost to companies and to the national economy of financing will be higher,” CTA spokesperson Eduardo Sengo.

The revelation of secret debts contracted between 2013 and 2014 by the Mozambican government project the image of a barely serious country, and will make doing business more expensive, Sengo said.“The credibility of the country had already been affected by the restructuring of the Ematum debt and, with the discovery of new debts, the country’s situation with regard to funding will be even more serious,” the CTA spokesman added.Sengo pointed out that the IMF’s position regarding the macroeconomic situation in Mozambique is crucial to investor confidence, and that the ultimate responsibility for defining the magnitude and nature of the new debt lies with the government.“We have to know if the new debt will be converted into public debt or remain just with the state as guarantor, as well as the maturity date and interest rates of these debts,” Sengo said.On 19 April, the Financial Times reported that the government of Mozambique had approved another loan of more than US$500 million to another company.On the same day, the Mozambican prime minister met the director general of the IMF, Christine Lagarde, and, according to a statement from the financial institution, recognized the existence of more than one billion US dollars-worth of external debt of Mozambique that had not been reported.Many Mozambican organizations have since expressed their indignation about the impact of hidden loans in government debt, demanding explanations from the government and a criminal investigation.According to a confidential prospectus prepared by the Ministry of Finance of Mozambique and delivered last month to investors in bonds of the Mozambican Tuna company (Ematum), the volume of public debt of Mozambique increased from 42 percent of GDP in 2012 to 73.4 percent in 2015.Ematum was the first known case of a loan (US$850 million) guaranteed by the government without being registered in the state accounts. The amount has since entered the public debt of Mozambique and Ematum obligations were exchanged for Mozambican sovereign debt in March.When the first news about the hidden Ematum loans first broke, the Frelimo majority in parliament rejected a demand by the main opposition Mozambican National Resistance (Renamo) party to explain the circumstances in which the debts were incurred.