Mozambique

Mozambique, the financially-embattled African nation, said on Monday it will miss a $60 million (€56.6 million) payment on an Irish Stock Exchange-listed bond this week, the Irish Times reported. With the government grappling with a hit to commodities-based revenues in recent years and the International Monetary Fund’s (IMF) move in 2016 to cut aid, Mozambique said in October it will seek to restructure debt.

Debt-ridden Mozambique has no chance of meeting its year-end deadline for a restructuring deal, according to investors who are preparing to dig in their heels until the country comes clear on what it owes and to whom, Reuters reported. The southern African country, one of the world's poorest, has seen its currency and investor confidence collapse since April, when the International Monetary Fund halted a loan after uncovering previously undisclosed debts that had not been approved by parliament.

Investors are preparing to fight Mozambique's plan to restructure their $726 million of bonds a second time, threatening a stalemate that could delay the country's access to much-needed aid, Dow Jones Business News reported. Bondholders are forming a committee to prepare for a potential default and say they won't negotiate debt relief now because they mistrust the government's financial disclosures and want it to seek relief from other creditors first, according to people familiar with the matter.

Mozambique’s central bank raised its key rate by 300 basis points to 17.25 percent, the fourth rate increase this year, as it tries to put a lid on soaring prices in the cash-strapped southern African nation, Bloomberg News reported yesterday. Policymakers also increased the interest rate on the standing deposit facility to 10.25 percent from 7.25 percent, Governor Ernesto Gove said.

Credit ratings firm Moody’s Investors Service cut Mozambique’s sovereign debt rating to Caa3, one of the lowest rungs on the junk-debt ratings ladder. The firm said it expects a continuing loan restructuring by state-owned company Mozambique Asset Management, or MAM, will be followed by defaults on other government debt. Investors believed Mozambique was poised to resolve its debt troubles as recently as March when Credit Suisse Group AG and VTB Group convinced holders of an $850 million bond to extend their repayment schedule.

The International Monetary Fund has added its voice to the growing diplomatic clamor for an international audit of Mozambique’s finances. IMF staff traveled to Mozambique in recent days to confer with its government on a worsening economic performance and poor financial governance after more than $1 billion of previously secret loans were disclosed to international donors and investors in April.

Mozambique is unwilling to convert a loan extended to a state-owned company into sovereign debt to avoid a default, according to an official familiar with the situation, who asked not to be identified because he’s not authorized to speak on the matter, Bloomberg News reported. Talks between the government and creditors to restructure the $535 million loan to Mozambique Asset Management, or MAM, were still going on, the official said from the capital, Maputo.

Until recently, Mozambique appeared to be riding a natural gas-fuelled wave, with predictions of vast riches filling the coffers of the impoverished southern African nation. Today, the country is facing what analysts describe as its worst crisis since a civil war raged more than 20 years ago, triggered by revelations that state entities borrowed $1.4bn — equivalent to 10 per cent of gross domestic product — in previously undisclosed loans. The saga is being described by observers as one of Africa’s worst cases of hidden borrowing in recent years.

The World Bank is suspending direct financial aid to Mozambique, joining the International Monetary Fund in cutting off budgetary assistance after learning of more than $1 billion in previously undisclosed loans, a person familiar with the matter said, The Wall Street Journal reported. The bank will continue to fund individual investment projects, but it is holding back payments of approximately $40 million this year for direct budgetary support, the person said.

Mozambique faces a deepening crisis after the International Monetary Fund suspended funding to the southern African nation following the discovery of more than $1bn in previously undisclosed government debt, the Financial Times reported. The scandal will heap pressure on Maputo, which is dependent on donors to finance about a quarter of its budget. Mozambique is battling to narrow a wide fiscal deficit, its currency has plummeted and its foreign reserves are dwindling.