IMF Says No Mozambique Aid Talks While Country in Debt DistressBy
Mozambique Finance Minister Maleiane wants to restructure debt
Exotix sees investors taking a 20 percent haircut on loans
The International Monetary Fund will withhold any further funding to Mozambique, which told creditors this week it wants to restructure its commercial loans, while the country is still classified as debt-distressed, a spokesman for the lender said.
“In line with Fund policies, we cannot disburse funds in a situation where we think the debt is not sustainable,” Gerry Rice told reporters in Washington Thursday, according to a transcript of the briefing posted on the IMF’s website. “As with any country, to be able to disburse we need to know that the debt is sustainable.”
Mozambique’s Eurobonds have fallen by as much as 24 cents on the dollar to 57.18 cents in the dollar since Finance Minister Adriano Maleiane told investors Oct. 25 that the country was in “debt distress” and wouldn’t be able to make an interest payment on the debt due in January. The IMF halted aid disbursement after the government admitted to about $1.4 billion in undisclosed loans in April, prompting other donors to stop budget support too.
The government plans on reaching a deal with investors to restructure its external debt by the end of the year, to allow it to conclude an agreement with the IMF on a new program early next year, according to the Finance Ministry. This timing is “terribly ambitious,” Stuart Culverhouse, an economist at Exotix Partners in London, said in a note to clients Friday.
The nation, which has appointed Lazard Frères and White & Case LLP as advisers to help with the planned restructuring, may seek relief for as much as 40 percent of its total debt of about $10.1 billion, Culverhouse said. A “strong group of creditors” may be able to negotiate a 20 percent writedown of the debt, he said. The IMF is ready to help the government in restructuring process, it said this week.
Another condition the IMF has given to resuming aid discussions with Mozambique is that the country agrees to an independent, international audit of its foreign debt. The government will issue a tender for a company to carry out the probe, Prime Minister Carlos do Rosario told lawmakers this week.