Mozambique searches for options to stabilize debt

MAPUTO (Capital Markets in Africa) – Mozambique will take “all necessary steps” to put its debt on a sustainable path in order to qualify for a resumption of International Monetary Fund aid, the country’s Finance Ministry said.

The government wants its creditors — which include bondholders and other lenders — to organize into a single committee to start negotiations about debt restructuring, the ministry said in an e-mailed statement Thursday, responding to earlier reports that it planned to extend maturities rather than impose outright losses on investors.

“The objective of the negotiations must be to arrive at an agreed treatment of Mozambique’s public and publicly-guaranteed external commercial debt that satisfies the IMF definition of debt sustainability for low-income countries and takes into account the payment capacity of Mozambique in the near and medium term,” the ministry said. “It is premature and counter-productive at this stage to speculate as to the outcome of the forthcoming negotiations.”

A finance ministry spokesman said on Wednesday the country wanted to avoid debt writedowns and would look to extend maturities up to 2024, when revenues from offshore gas fields would be boosting the economy. The government said last week it needed to restructure as much as $2.1 billion of commercial debt by the end of the year before starting talks with the IMF, which suspended aid in April after discovering $1.4 billion of hidden loans to state-owned companies. Lazard Freres and White & Case are advising Mozambique on the restructuring.

“One way or the other it is critical that a consensual resolution is found as soon as possible to avoid the consequence of a continued deterioration of the macroeconomic and fiscal situation,” the ministry said.