The exchange of EMATUM's debt for Eurobonds was a maneuver to hide the truth from the public and the IMF, resulting in an increase in the debt from 500 million dollars to 721 million and then to 900 million, says the Budget Monitoring Forum (FMO), which cites the indictment by the US justice system against former Finance Minister Manuel Chang.

According to FMO, "this operation, which was initially presented by the Mozambican government as a restructuring solution, in accusations by the US government, it is clear that this restructuring had the objective of hiding the near bankruptcy of the state-owned company from the public and the International Monetary Fund (IMF), as well as further concealing the fraudulent scheme."

Since 2018, Mozambique has disbursed around 45 million dollars in annual interest and is expected to disburse 1.5 billion dollars by 2031, referring to principal and interest, according to a note released by the forum, alluding to the aforementioned accusatory report, cited by the Savannah newspaper.

The document also points out that "the government apparently ignored an opportunity for 200 million dollars of debt relief".

Additionally, according to FMO, what was initially presented as a solution to restructure EMATUM's debt, and which placed a higher burden on state accounts, is presented by the US court indictment against Manuel Chang and co-conspirators as a maneuver in the fraudulent scheme.

According to the indictment against Manuel Chang, which is currently pending in a New York court, the co-conspirators proposed exchanging EMATUM loan participation notes for Eurobonds in order to hide the near bankruptcy of the project companies from the public and the IMF.

The operation made it possible to strategically extend the maturity date of EMATUM's debt, further concealing the fraud presented by the prosecution.

Under pressure from IMF investigations into Mozambique's use of loan resources, the indictment points out that co-conspirators, including bankers from Credit Suisse, prepared misleading documents to convince investors, including from the United States, to participate in the eurobond swap operation.

For the prosecution, the documents contained false information about the destination of EMATUM's loans, the expected returns, the maturity dates and the risks of corruption and money laundering associated with the project, leading to unrealistic perceptions about the Eurobonds. "These false statements and omissions were material to the investors' decision, and form the basis of the fraud charge," the indictment reads.

Nevertheless, the same indictment adds that the conspirators took advantage of investors' trust in the American financial system, in that some traveled to New York to convince American investors physically, and the electronic transfers of investors' funds were processed through Credit Suisse accounts in New York, thus using the US financial system.

The indictment details that after the exchange was announced in March 2016, there was no fulfillment of the financing payments until January 2017, indicating an inability or lack of intention to repay investors. Specifically in relation to Manuel Chang, the indictment shows emails and spreadsheets indicating that Privinvest made bribery and kickback payments to Chang and others involved. Chang argues that, having left office in 2015, he had no direct involvement in the Eurobond exchange in 2016.

"Although Chang was not directly involved in the exchange of the Eurobonds, the judge found that the continuity between the financing of the maritime projects and the subsequent restructuring of securities did not constitute separate conspiracies," he said.

The exchange of securities for euro bonds has led to significant financial losses that could be used in key sectors of the economy and significantly jeopardizes future fiscal space until 2031, to the detriment of social and economic investments that could be made, the FMO points out.

Chronologically, EMATUM was unable to meet its financial commitments to creditors, including 500 million dollars owed to Credit Suisse.

The Mozambican government, advised by LAZARD, took responsibility for the debt and the interest on it, ignoring several warnings made by FMO.

The Mozambican state claimed a lack of capacity and went ahead with the first restructuring in 2016, which extended the payment period and raised the value of the bonds to 726.52 million dollars. Three years later, in 2019, the Mozambican government opted for another restructuring, called MOZAM 2032, raising the value of the debt to 900 million dollars, entailing costs of around 40 million dollars in consent fees and exchange payments.

(Photo DR)