Preto & Branco

Billion dollar debt makes Mozambique hostage to China

In just eight years, the Mozambican debt to China rose from US $ 45 million in 2010 to the astronomical target of US $ 1.1 billion in 2018, making it the largest debt that Mozambique has with a single country, representing about 20.2% of the country’s total foreign debt. In this context, the Government may find itself unable to pay the bills for this billionaire debt, making the country hostage to the Chinese will and with the imminent blackmail of confiscating national assets for non-compliance.

According to a study by the CIP, made public last week, following the discovery of the so-called hidden debts, Mozambique was unable to count on Western support for its State Budget, having leaned towards China, which does not impose political conditions nor economic in its cooperation with developing countries.

It was found that reports on Mozambican indebtedness indicate that in 2010, the debt with China was 45 million dollars, but in 2018 it had already grown to 2.1 billion dollars, and at the moment, the Mozambican debt with China is the largest that Mozambique has with a single country, “and this debt represents about 20.2 percent of Mozambique’s total external debt, and about 13.2 percent of the country’s Gross Domestic Product (GDP),” .

The CIP survey notes that this debt represents huge fiscal risks, the first of which is the foreign exchange, because since it is denominated in dollars, and given the current situation of depreciation of the metical against the dollar, “this debt increases with over time. ”

In addition, debts with China are practiced at an interest rate of 1.5 percent, “which reveals that these credits are quite costly. This affects the availability of resources to finance spending on Covid-19, precisely because the country have to pay those debts “, it is noticed.

Cited by Voice of America, CIP researcher Leila Constantino, who participated in the survey, warns that “in case of default, Mozambique” may be in a situation of having to pledge some assets, and we have the case of Kenya in that China confiscated the port of Mombasa, for failure to pay the debt, “he exemplified.

He added that “there are several risks associated with this debt that are damaging the coffers of the State. For this specific case, the recommendation that CIP makes is that the Government has to renegotiate the debt with China, within the scope of the debt forgiveness process currently under implementation “, he suggested.

 

 

 

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