The Mozambican government may have to borrow an additional US$2.3 billion to secure the participation of the National Hydrocarbons Company (ENH) in Anadarko’s natural gas project, the IMF said.
According to financial news agency Bloomberg, citing a report prepared by International Monetary Fund (IMF) experts which would be discussed by the Fund’s management today Friday, this is a problem given the country’s poor financial situation.
According to the IMF’s assessment, ENH would have to secure US$2.3 billion in funding to participate in Anadarko’s US$25 billion liquefied natural gas investment.
Some of the largest public companies have unsustainable debt and may need a debt forgiveness or restructuring, the Bloomberg article reads, without citing the report directly.
The IMF’s assessment suggests that the Mozambique remaining as indebted as it is until natural gas projects start to be profitable for the country is not an option, but the government sees this postponement as a viable option.
Against this backdrop, IMF experts anticipate only 2 to 2.5 percent growth in gross domestic product in the medium term, accelerating to 10 percent in 2023 on the strength of gas production.
The gap in public accounts arose in 2013 and 2014, when three public companies an international audit says were acting as front businesses contracted debts of about two billion dollars, based on state guarantees allegedly signed without any legal basis and without the knowledge of donors or national authorities, in what became known as the ‘hidden debt’ scandal.
The fate of most of the money remains to be ascertained, with companies justifying non-disclosure on the grounds of national security.
Among the creditors are holders of US727.5 million dollars’ worth of debt securities who have already accepted a reduction in payments and an extension of maturity, which led directly to the downgrading of Mozambique’s credit rating to default.
Holders of these securities (which result from the exchange for Ematum bonds) refuse to be treated equally with the banks and investors who lent the remaining US$1.4 billion to public companies Mozambique Asset Management (MAM) and Proindicus.
The banks that lent the money were Credit Suisse and Russian VTB, whose chairman Andrey Kostin told Bloomberg a month ago that he was to meet Mozambican president Filipe Nyusi “to persuade him to negotiate” the payment of the country’s debt.
Rating agency Standard & Poor’s (S&P) has floated a possible reassessment of Mozambique’s foreign currency issue rating as early as February, once the restructuring is complete, although no specific date was given.
S&P has meanwhile kept the country at SD (‘selective default’), the lowest rating level, due to its default on the repayment of foreign currency securities, placing it at the B- level for short term sovereign debt issued in local currency and B for the long term.
-LUSA
