Creditors pile pressure on Mozambique

Mozambique may have reached a deal with most of its creditors under the World Bank Heavily Indebted Poor Countries (HIPC) Initiative, but it is becoming clear that debt to at least six countries, valued at hundreds of millions of dollars, is outside the deal and may not be cancelled.

The Romanian Ambassador in Maputo, Valeriu Nicolae, told the daily faxed newsletter Correio da Manha (7 January 1999) that Romania was not prepared to cancel any of its debt, although it would accept rescheduling. He said Romania is now going through a difficult economic situation and needed to recover at least some of the US$100 million it believes is owed.

The former Soviet bloc countries of eastern Europe gave substantial loans to Mozambique in the 1980s, and several are not part of the HIPC debt relief negotiations. These include Romania, the Czech Republic, Hungary, Bulgaria and the former Yugoslavia.

Mozambique also owes money to two oil producers, Iraq and Algeria, who both supplied oil on credit in the 1980s. Iraq is believed to have offered Mozambique a very favourable debt cancellation agreement, but Mozambique is thought to be afraid to accept it because it fears any public agreement with Iraq would offend the United States. Algeria, on the other hand, is refusing to make any concessions and is demanding full payment.

The Romanian ambassador also said that his government and Mozambique were divided on how to calculate interest rates on debt owed by Mozambique. There were a series of meetings between experts from the two central banks in the Romanian capital Bucharest in November last year.