Economics - European Union - Mozambique - Finance
Mozambique gets debt relief from Portugal
Portugal has cancelled Mozambique’s remaining debts to Lisbon, estimated at US$ 393.4 million, accumulated from independence until 2005.

Portugal has cancelled Mozambique’s remaining debts to Lisbon, estimated at US$ 393.4 million, accumulated from independence until 2005.

An agreement to that effect was signed Tuesday between Mozambican Finance Minister Manuel Chang and his Portuguese counterpart Fernando Teixeira dos Santos.

Negotiations on the debt cancellation had begun in late 2005 and, a few months ago, the technical negotiations were completed, paving the way for the signing of Tuesday’s agreement.

Most other European creditors had cancelled Mozambique’s debts long ago.

Chang described the debt cancellation as an acknowledgment by Portugal of the achievements of the Mozambican government in implementing programmes aimed at growth and the socio-economic development of the country.

He said that money that would have otherwise gone towards servicing the debts could now be used to finance activities included in the government’s Action Plan for the Reduction of Absolute Poverty (PARPA).

Responding, the Portuguese Minister (Teixeira dos Santos) said the debt cancellation was in line with a commitment by Portugal, as a member of the "Paris Club" of credit or nations, to cancel the debts of Highly Indebted Poor Countries (HIPC).

This is part of an international initiative involving the international community, the International Monetary Fund and the World Bank to cancel debts of the Highly Indebted Poor Countries.

Mozambique has been meeting its development challenges and deserved special attention from the international community, the Portuguese minister said.

However, Portugal dragged its feet in implementing its HIPC undertakings.

Explaining this delay, Teixeira dos Santos told reporters that, though negotiations started in 2005, the final agreement was only signed Tuesday because Portugal itself had been facing a serious financial crisis as a result of its budget deficit, 6.1 per cent, well above the 3 per cent acceptable to the European Community.

He explained that, before writing off the debt, Portugal had first to stabilise its own economy.

"A month after we gained acknowledgement from the European Commission that we have lowered our deficit to less than three per cent, we are here, in Mozambique, to say that we are in a position to cancel the debt".

Besides this agreement, the two countries also signed other memoranda — a tripartite agreement to grant a 100 million Euros (US$ 148 million) loan, and another on technical cooperation between the finance ministries of the two countries.

The tripartite agreement was signed between the two ministries and the Portuguese state bank, the Caixa Geral de Depositos (CGD).

This credit will be used to develop socio-economic infrastructures in the areas of agriculture, energy, public works, industry and trade.

On technical cooperation, the two ministries intend to design programmes and step up technical assistance in the areas of customs, public purchases, public debt, planning and international relations, taxes, financial inspections, budgeting and public accounting.


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