Undisclosed loans put Mozambique in IMF dog box

The IMF, which is headed by Christine Lagarde, cancelled a mission to Mozambique once it discovered the loans. (Eric Vidal, Reuters)

The IMF, which is headed by Christine Lagarde, cancelled a mission to Mozambique once it discovered the loans. (Eric Vidal, Reuters)

Mozambique’s Eurobond yields rose for a fifth day to a record level after the International Monetary Fund (IMF) said that it hadn’t disclosed about $1-billion of debt.

Yields on $727-million of notes due in January 2023 climbed four basis points to 14.08% on Tuesday, having closed at 12.72% on April 14, the day before the IMF made its announcement. The bonds have lost 6.3% since peaking on April 13, a week after they were issued. That compares with an average gain of 0.3% for high-yielding emerging-market sovereign ­dollar bonds in that period, according to data compiled by Bloomberg.

“The price has dropped because of the news that there are even more loans outstanding,” Marco Ruijer, a money manager who oversees about $7-billion of emerging-market debt at NN Investment Partners, told reporters in London on Tuesday.

“They didn’t announce those to the IMF before and that’s really a bad thing. Now the market is so shaky. All we can do is wait to see where the numbers are coming from.”

Mozambique issued the interest-only bond, its first in a foreign currency, earlier this month after swapping investors out of a $697-million amortising note sold by a state-owned tuna-fishing company and due in September 2020.

Holders of about 85% of the debt of Empresa Moçambicana de Atum SA, or Ematum, voted to accept the restructuring on April 1, after Mozambique, one of the world’s poorest countries, said it wanted to lower its annual debt-service costs by reducing principal payments over the next few years.

The IMF cancelled a mission to Mozambique once it discovered the undisclosed bilateral loans.

The country is at “high risk” of debt distress and may have to repay $119-million it borrowed from the IMF as part of a $286-million emergency facility signed with the Washington lender last year, according to Anne Frühauf, senior vice-president at Teneo Intelligence.

“The undisclosed borrowing exceeds $1-billion and significantly changes our assessment of Mozambique’s macroeconomic outlook,” Antoinette Sayeh, head of the IMF’s Africa department, said at a press conference in Washington on April 15.

“We are currently ascertaining in co-operation with the authorities the facts regarding this borrowing,” she said. – © Bloomberg

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