The government announced this Monday, 1 July, 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),” the Minister of Economy and Finance, Max Tonela, said today, quoted by Lusa news agency.
According to the minister, “the state’s potential liability in this process, including both the capital and the interest, would be around 88.4 billion meticals (1.4 billion dollars), with interest continuing to accrue, as well as estimated costs in the order of 3.9 billion meticals (50 million pounds), in the event of losing the case”.
The hidden debts scandal dates back to 2013 and 2014, when the then finance minister, Manuel Chang, who is now in detention in the United States, approved state guarantees on loans from Proinducus, Ematum and MAM to the banks Credit Suisse and VTB, in absentia.
Discovered in 2016, the debts were estimated at around 170.6 billion meticals (2.7 billion dollars), according to 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, VTB Capital Plc (intervened) and the former VTB Bank Europe, in a dispute that has been running in the London Court since February 2019.
“The out-of-court settlement offers clear advantages for the state, compared to an uncertain court decision with possible unsustainable consequences for the country in the short and medium term. It also avoids endless appeals and extremely high costs, considering the country’s current economic and fiscal challenges,” Max Tonela said.
The minister added that the conclusion of the agreement is “affordable within the limits approved in the Social Economic Plan Law and the 2024 State Budget”.
The government also pointed out that the agreement does not affect the actions to hold those involved in the hidden debt scandal accountable.
This is the second out-of-court settlement in this case. 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.
Made public on 1 October, the day before the trial began in the British courts, the main signatories to the agreement were the government and the UBS group, owner of the Credit Suisse bank, the main financier of the state company Proindicus to buy ships and maritime surveillance equipment in 2013.
“Mozambique is now unconditionally open to the market and its government is committed to strengthening the governance agenda and structural fiscal reforms on a healthy basis and to giving its full attention to implementing the right measures to support the country’s economy,” concluded Max Tonela.
The current trial is the culmination of almost four years of litigation in the British courts, to which the country appealed alleging corruption, conspiracy to defraud by unlawful means and dishonest assistance to cancel debts and claim financial compensation worth millions of dollars.
Mozambique is demanding 195.9 billion meticals (3.1 billion dollars) in damages, compensation and indemnity from the shipping group Privinvest and its owner, Iskandar Safa, whom it accuses of paying bribes to public officials, including former Finance Minister Manuel Chang, who signed the sovereign guarantees on the loans.
