The International Monetary Fund (IMF) revealed on Wednesday (17) that the costs of the new agreements between Mozambique and the banks to resolve the problem of hidden debts could consume 1 per cent of Gross Domestic Product (GDP) by 2024.
The financial organisation, quoted by Bloomberg, explained that the hidden debts contracted by the country continue to be a source of pressure for public finances, stressing that it is crucial that Mozambique begins to reformulate its asset declarations and conflict of interest laws to bring them into line with international standards.
The Fund also emphasised the importance of greater transparency in public procurement, given the size and relevance of Mozambican state-owned companies in relation to the economy, which would prevent cases of corruption from occurring.
“Mozambique has reached an agreement with its creditors to settle the remaining outstanding amounts of the debt disclosed in 2015. The agreement covers around 648 million dollars of outstanding capital (with total liabilities including interest of 1.4 billion dollars) and implies a payment of 220 million dollars, corresponding to 1 per cent of GDP in 2024,’ the institution recalled.
At the beginning of the month, the government announced an out-of-court settlement with three banks, including Portugal’s BCP, in the dispute in London over the hidden debts, providing for a reduction in ‘state exposure’ from 88.4 billion meticais to 13.9 billion meticais (from 1.4 billion to 220 million dollars).
‘The out-of-court settlement reduces the state’s exposure to 13.9 billion meticals (220 million dollars), i.e. a cut of 84 per cent of the banks’ total claim (and 66 per cent of the capital),‘ explained the Minister of Economy and Finance, Max Tonela.
According to the minister, ‘the state’s potential liability in this process, including both the capital and the interest, would be 88.4 billion meticals (1.4 billion dollars), with interest continuing to accrue, in addition to the costs estimated at 3.9 billion meticals (63.2 million dollars), in the event of losing the case’.
The hidden debt scandal dates back to 2013 and 2014, when the then Finance Minister, Manuel Chang, now in detention in the United States, approved state guarantees on loans from ProIndicus, Ematum and MAM to the banks Credit Suisse and VTB, without the consent of parliament.
Discovered in 2016, the value of the debts was estimated at 170.6 billion meticals (2.7 billion dollars), taking into account the figures presented by the Public Prosecutor’s Office.
The agreement announced today was reached with Banco Comercial Português (BCP), which only participated in the loan to the company MAM, with VTB Capital Plc (intervened) and with the former VTB Bank Europe, in a dispute that has been running in the London Court since February 2019.
“The hidden debts contracted by the country continue to be a source of pressure on public finances.It is crucial that Mozambique begins to reformulate its asset declarations and conflict of interest laws to bring them into line with international standards.”
“The out-of-court settlement offers clear advantages for the state, compared to an uncertain court decision, and with possible unsustainable consequences for the country in the short and medium term. It also avoids endless appeals and extremely high costs, considering Mozambique’s current economic and fiscal challenges,’ said Max Tonela.
This is the second out-of-court settlement in this case, since Mozambique previously announced that it had paid 8.2 billion meticals (130 million dollars) to financial institutions as part of the out-of-court settlement with Credit Suisse, to end a dispute in the London Commercial Court over the ‘hidden debts’ case.
