Mozambique says will miss US$60 million interest payment

MAPUTO: Mozambique, caught between a scandal over hidden debt that has prompted an aid cutoff and a commodity price slump, said it would miss a US$60 million interest payment.

The country is currently in talks with the International Monetary Fund (IMF) over resuming support that was suspended in April due to the hidden debt scandal.

“The deteriorating macroeconomic and fiscal situation of the Republic has severely affected the country’s public finances,” the finance ministry said in a statement in Maputo.

“The resulting debt payment capacity of the Republic is therefore extremely limited in 2017, and does not allow the Republic room to make the scheduled interest payment.”

The statement said Mozambique would not pay the US$60 million (57 million euros) interest payment on a 2023 bond scheduled for January 18.

The bonds were originally issued in April 2016, according to Factset.

The bonds fell to 54.917 cents on the dollar by 10:58 am in London, having reached a record low of 50 cents last week, according to Bloomberg News.

Last month, a parliamentary inquiry concluded that the government broke the law by securing loans worth more than US$2 billion in hidden debt that had prompted the IMF and World Bank aid cutoff.

The scandal dates back to 2013, when the government announced a contract for 30 fishing and coastal protection vessels between French shipyards and Ematum, a state-owned company that had previously raised US$850 million on the eurobonds market without the knowledge of lawmakers.

In April last year, more hidden debt worth US$1.4 billion – contracted without parliamentary approval by two more state-owned firms and the defence ministry – was uncovered.

The government claimed the loans were used to fund military vessels and defence equipment, and said it did not disclose them as a matter of national security. — AFP