The news that Mozambique had finally succeeded in convincing its creditors and reached an agreement to restructure a loan that has been crippling the small African country came as a sign of relief to many; but proceeding to consider the terms of the new agreement leaves a bitter taste in the mouth as there seem not to be a tangible improvement from the previous agreement which the southern African nation was unable to meet with.
It all began in 2013 when the country acquired a debt from the International lenders. Three years on, in 2016, the country contracted a bond issue, in the form of Eurobonds worth $726.5 million, to be repaid by 2023 at the latest.
According to the agreement, the loan acquired in 2016 was to be used in paying the previous loan gotten in 2013. This you will agree is a 'robbing Peter to pay Paul' approach which never really helps.
As expected, the country fell into a bad debt and was caught in the position of being unable to completely pay both the 2013 loan nor the 2016 bond. In 2017, the country had no other option but to cry out and admit that there was no way they could meet up with interest which the loans have accumulated. Interests which as at January 18, 2017 had risen to $59.7 million.
Since then the country had tried to reach an agreement with the creditors to restructure the debt terms which they finally have.
However, it appears that to clear its debt, Mozambique may have to borrow even more. These are the terms of the new agreement:
(a) It will issue a new, bigger loan: $900 million as against $726.5 million.
(b) But the repayment term is extended by 10 years from 2023 to 2033.
(c) The interest rate decreases to 5.8% from 10.5%.
Reacting to the new agreement, Ivone Soareso, leader of the parliamentary group of the opposition party Renamo in Mozambique expressed displeasure, saying:
“I also think that the banks have their share of responsibility. I am talking about Credit Suisse and VTB, which give money to African governments, to corrupt regimes in Africa, without really trying to find out if this money is being used for the benefit of the people of these countries, to contribute to the projects of this country, or if this money is being used for illegal purposes, for the private purposes of these leaders, or for inconceivable purposes.”
What are your thoughts on the new agreement?
Photo Credit: Fair Observer