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CIP: “Government Resorted to Internal Debt to Pay Hidden Debts”

CIP: “Government Resorted to Internal Debt to Pay Hidden Debts”

The Centre for Public Integrity (CIP) revealed that of the 142 million dollars (8.9 billion meticals) paid by the government to the creditors of the Proíndicus debt in October last year, 96 million dollars (6 billion meticals) came from domestic debt, through the issue of Treasury Bonds (OT) with a maturity of six years.

The non-governmental organisation considered that, although the action served to improve the country’s financial credibility and image at international level, it also contributed to reducing fiscal space for other current expenditure and investments, as well as increasingly reducing access to domestic credit and increasing market interest rates.

“The reduced fiscal space to meet financial commitments and the difficulty of managing public debt have a negative impact on investment and the repayment of external debt. Investment fell from 44.1 billion meticals in 2019 to 33.3 billion in 2023. And the government has seen recurrent delays in the payment of foreign debt,” he added.

For the organisation, OT should be used to finance infrastructure in priority sectors, guaranteeing economic growth and the conditions for interest to be repaid without sacrificing future investment.

“The basic assumption behind the use of debt is that it will generate jobs and boost economic growth, improve the population’s quality of life and levels of growth and the ability to repay interest and capital. However, this fact is being contradicted by the policy adopted by the government of using debt for current expenses, and now for paying off hidden debts,” he emphasised.

Recently, the BoM made it known that it had paid at least 45 million dollars to national financial institutions that lent money to Proíndicus, the company that benefited from the so-called “hidden debts”.

“I’m not going to hide it from you, we used our reserves to pay these small creditors, namely Millennium bim, Moza banco and BCI. We disbursed 45 million dollars which we ended up using for this situation,” said the governor of the Bank of Mozambique, Rogério Zandamela, on Thursday 28 March, during a press conference on the results of the meeting of the Monetary Policy Committee (CPMO) of the Mozambican financial regulator.

He said that the agreement with the Mozambican banks that lent money to the Proíndicus project was the result of an understanding between the state and UBS, the institution that acquired Credit Suisse.

The BoM governor maintained that the Mozambican creditors were not in a position to write off the company’s debt because it would mean giving up important resources for the Mozambican financial system.

“Clearly, the financial system was not in a position to forgive this debt, because to forgive, in the banking system, means to remove the debt from the portfolio,” he emphasised.

Zandamela emphasised that UBS had forgiven part of Proíndicus’ debt, describing the operation as a relief for the Mozambican state, but did not specify the sums involved.

“The government played its part, made its reduction and part of the debt was forgiven, the banks lost, but not everything,” he emphasised.

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