Mozambique needs a wide-ranging plan to ensure long-term debt sustainability

Mozambique has been in talks to restructure its $2billion defaulted loans with private creditors. In November, the country announced an agreement in principle with investors to restructure its $727 million Eurobonds which was converted from the $2 billion. The International Monetary Fund (IMF) which welcomed the agreement, today noted that the country needed a wide-ranging plan to ensure long-term debt sustainability.

The IMF stressed the importance of “strengthening oversight of the entire public debt portfolio, including for state-owned enterprises, to put public debt-to-GDP ratios on a clear declining path.”

The debt restructuring was to see debt-holders paid a portion of future revenues from gas projects planned for the north of the country. However, Mozambique’s finance ministry today said it had reached a restructuring deal in principle with holders of its defaulted 2023 bonds and that the new arrangement would not offer creditors instruments linked to future gas revenues.

Last year, the country’s Ministry of Finance said in a statement on its website that, “the government is monitoring the latest legal developments nationally and internationally and, while always protecting the interests of the state, will continue with negotiations to the conclusion of the process that has been underway since 2016.”

“These negotiations are very important for the reintegration of Mozambique into the international financial markets and to strengthen the confidence of economic agents,” said the statement.

In 2016, Mozambique sold debts on international markets without informing the country’s parliament and the IMF. When the loans were discovered to be government guaranteed, Mozambique was cut off from international credit lines in 2017. This plunged Mozambique into an economic crisis and raised the country’s debt ratio to unsustainable levels. Till date, the East African country is still trying to restructure its debts.