Mozambique Donors May Delay Aid Pending Tuna Bond Clarification

Mozambique risks delays in payments because of questions by donor countries over an $850 million bond issue that will be used to fund fishing vessels and patrol boats, according to advisory company Teneo Intelligence.

The government’s decision to underwrite the bond “has generated countless questions and threats” from donors, known as the G19, to delay budget aid, Anne Fruhauf, an analyst for New York-based Teneo, said in an e-mailed response to questions. “Donors are concerned direct budget support will end up funding a guarantee for a very murky deal.”

Mozambique set up Empresa Mocambicana de Atum SA, or Mozambican Tuna Co., known as Ematum, in August. Credit Suisse Group AG and VTB Capital Plc financed its tuna boats, then packaged the debt into notes for overseas investors. The fleet also includes anti-piracy patrol boats, according to the French Foreign Trade Ministry.

The country’s main donors, known as the Program Aid Partners, are the World Bank, the African Development Bank, the European Union, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the U.K.

The partners want to have further talks about Ematum “to get all the relevant information” in response to their concerns, Roberto Vellano, Italian ambassador and president of the donor group, said yesterday at a meeting in the capital, Maputo.

“Donors are unlikely to cancel all the outstanding $175 million in aid disbursements for 2013, but some budget support will likely be withheld in the fourth quarter,” Fruhauf said.

Seeking Clarity

Mozambique is trying to confirm the details of the commercial and non-commercial aspects of the issue, Planning and Development Minister Aiuba Cuereneia said in an interview, without giving details.

“Key concerns are the company’s unclear mandate, a lack of feasibility studies, and unclear procurement spending,” which includes patrol boats and possibly military hardware, Fruhauf said.

“Drastic aid cutbacks would be a worst-case outcome. Most donors, including the U.K., are heavily vested in Mozambique and are increasingly keen to leverage their development support for commercial ends in what is one of the world’s fastest-growing economies,” she said. “But the chances of longer-term cutbacks, especially in direct budget support, have certainly increased thanks to Ematum.”

Mozambique is the site of the world’s largest discovery of natural gas in the past decade and is developing infrastructure to increase its output of coal.

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