IN 2014 Mozambique seemed a good place to host the IMF’s “Africa Rising” conference. The economy was buoyant, having grown by about 7% a year for a decade. Offshore gas promised riches. Investors were optimistic, so much so that, in 2013, they snapped up $850m of bonds issued by a state-owned tuna-fishing company, with temptingly high yields.
But Mozambique’s rise has halted. Those “tuna bonds” were the first mis-step in a widening scandal that led the government to say on January 16th that it would default on its debt.
The government’s financial difficulties arise partly from a downturn in commodity prices that caused economic growth to slump to 3.4% in 2016 (though it should improve this year). Yet the main reason the government is in a pickle is its own fecklessness. The state-owned tuna company that issued the bonds never caught many fish. That is scarcely surprising since much of the money it raised went toward buying gunboats instead of the fishing sort. When it became clear that the company could not honour its debts, bondholders agreed to swap the bonds it had issued for government ones. Yet before the...Continue reading
Source: Middle East and Africa http://ift.tt/2iWSqXK
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