LONDON (Reuters) – Heavily indebted Mozambique has been battling for years to recover from a debt crisis and Monday’s agreement with Eurobond creditors marks another step on the way.

In 2016, the southern African nation admitted to $1.2 billion of previously undisclosed lending, much of which was supposed to be spent on a tuna fishing fleet.

The disclosure prompted the International Monetary Fund and foreign donors to cut off support, triggering a currency collapse and a default on the country’s sovereign debt.

One of the poorest countries in the world, Mozambique saw its currency lose a third of its value over the course of 2016, the year it defaulted. The currency has lost more than 60% over the past decade.

Growth rates have tumbled from around 7% between 2010 and 2015 to nearly half that. Earlier this year, cyclone Idai killed more than 1,000 people in Mozambique, Zimbabwe and Malawi, devastating farms, disrupting transport and hitting growth prospects.

However, the discovery nearly a decade ago of substantial offshore gas reserves has spurred hopes the country could become a major exporter of liquefied natural gas – so far the only likely long-term solution to its financial problems.

The IMF expects growth could approach double digits in the late 2020s, once the LNG project kicks in.

Following is a summary of what is known about Mozambique’s debt:

TOTAL EXTERNAL DEBT – $14.78 BILLION

Mozambique’s total external debt ballooned to $14.78 billion in 2019, according to the IMF. That’s a near 30% jump in the past two years.

The country’s debt-to-GDP ratios have shot up in recent years. Currently at 113%, the ratio stood at less than 54% in 2013. Not much relief is expected before revenues from its big gas projects come on stream in 2023. By 2022, S&P Global estimates the ratio will fall only to 107%.

COMMERCIAL DEBT – $1.9 billion

Eurobonds – Mozambique is restructuring a eurobond it sold in March 2016 and on which it has $727 million outstanding.

That bond was the result of a restructuring of an $850 million facility, issued by state-run tuna-fishing company Ematum in 2013. Those notes – dubbed “tuna bonds” – were supposed to finance a tuna fleet and fishing infrastructure, but much of the cash was later designated for maritime security and reallocated to the defense budget.

The tuna notes were restructured in spring 2016 into an English-law sovereign Eurobond maturing in 2023. Within weeks Mozambique’s hidden lending emerged, international lenders pulled out and Maputo faced another default which the government is trying to cure in the latest restructuring.

As part of the overhaul, Mozambique proposes to issue $900 million of new, amortizing sovereign bonds maturing in 2031. The bonds come with an interest rate of 5% up to September 2023 and 9% thereafter until maturity. The proposal also includes up to $40 million in cash payments.

ProIndicus – the state-owned firm, owned by the defense and interior ministries and state security service, borrowed $622 million for maritime security projects in a loan arranged by Swiss lender Credit Suisse CSGS.S.

Mozambique Asset Management (MAM) – the state-owned company took out a $535 million loan arranged by Russian state bank VTB, to build shipyards in Maputo and the northern city of Pemba. The shipyards have not materialized.

All of Mozambique’s commercial debt has been earmarked for restructuring. Yet it is unclear how much progress has been made on the MAM and ProIndicus loans. The IMF said in May restructuring discussions between VTB and Maputo were in the final stretch.

VTB CEO Andrey Kostin said in early September that Mozambique must restructure the loan by year-end or face the prospect of defaulting on it.

Mozambique’s Attorney-General has filed a lawsuit in the UK to nullify the government guarantee to the loan contracted by ProIndicus with Credit Suisse.

KNOWN BILATERAL & CONCESSIONAL DEBT

By the end of 2017 – the latest data available – Mozambique’s external concessional debt stood at $8.063 billion, or 67% of its total external debt burden at the time, according to the World Bank.

Credits from World Bank arms such as the IBRD and IDA amounted to $2.8 billion while the use of IMF credit stood at $343 million at that time, the lender added.

The remaining $4.9 billion would be made up of loans from multilateral institutions such as the African Development Bank.

The country is also in arrears to five official non-Paris Club creditors, owing Libya, Iraq, Angola, Poland and Bulgaria a total of $94 million.

Mozambique also owes Brazil – a member of the Paris Club of wealthy nations – nearly $23 million in respect of a $125 million guaranteed borrowing.

Mozambique told Eurobond creditors in August it was currently discussing possible restructuring solutions with these creditors, though added there was no agreed timeline for such

WHICH LEAVES NEARLY $5 BILLION OUTSTANDING…

Analysts and investors speculated that foreign governments such as China – which has invested in many African countries in projects in the infrastructure and commodities sector – could make up a good chunk of the remainder.

Some lending would be linked to large infrastructure projects, such as the 3km-long Maputo bridge – the longest suspension bridge on the continent – built by China Road and Bridge and financed chiefly through loans from China’s Exim Bank. Russia is also active in the country, according to analysts.

Moscow and Beijing prefer not to publish overseas aid and investment figures.

SOURCES: International Monetary Fund, World Bank, Mozambique Finance Ministry, Kroll, Exotix/Tellimer

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