China Sees Mozambique as a ‘rough diamond’ amidst debt crisis
Chinese President Xi Jinping (R) meets with Mozambican President Filipe Nyusi in Johannesburg, South Africa, Dec. 3, 2015. (Xinhua/Li Tao)
Mozambique’s mounting debt crisisthat has seen western donors cut their funding to the South-East African nation, has pushed it to seek closer ties with China, which China Daily termed a “rough diamond” and a “brother”.
A fall in commodity prices has left the coal and gas rich African nation with its debt levels (compared to GDP) rising from just 42% a year ago to nearly 80%.
The discovery of hidden loans amounting to over $1.1 billion in April by the International Monetary Fund (IMF) further jolted western investors and donors who have reacted swiftly by holding back their funds from the country.
Other previously unacknowledged loans have since been revealed, bringing Mozambique’s surprise debt toll to at least $2.32 billion, according to Chatham House.
The country’s total public debt currently stand at $11.64 billion, of which $9.85 billion is owed to foreign investors. The nation also said it won’t be able to honour a $178 million debt-interest repayment due in May, pushing yield on its Eurobonds to a record high, Bloomberg reported.
In the wake of these revelations rating agencies have also downgraded Mozambique.
Mozambique’s President Filipe Nyusi is on a visit to Beijing, China, with other high ranking government officials, to try and cement ties with the Asian giant after fruitless visits to Brussels and Washington.
China pledged to extend a $5 billion in soft loans over two years to the South-East African nation as a “priority partner”, during the Forum on China-Africa Cooperation (FOCAC) held in South Africa last December, where Xi pledged up to $60 billion to the African continent in the form of soft loans and development aid.
China has previously engaged in big construction projects Mozambique, as it has done in many other African countries.
Even as the debt crisis unfolds, the Chinese government signed a grant on May 5, worth $16 million for Mozambique to buy 80 buses for public transport and to dig 200 boreholes for drinking water.
Some analysts have predicted that this show of willingness by Beijing to step in and support its “brother” in crisis will increase its influence in the country’s vast coal and gas reserves that are yet be tapped, Global Construction Review reported.