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China cancels Mozambique’s debt

Chinese President Hu Jintao on Thursday February 8th announced the cancellation of all Mozambican public debt to China incurred during 1980-2005. According to Mozambican Finance Minister Manuel Chang, this debt, on which no interest was being paid, amounts to about US$20 million.

Hu, who is on a 24-hour state visit to Mozambique, as part of a tour of eight African countries, made the announcement after official discussions with his Mozambican counterpart, Armando Guebuza. Hu also announced that the number of export goods that can enter China from Mozambique duty free has risen from 190 to 442. However, no list of these goods is yet available.

Trade between China and Mozambique has been growing quite rapidly. Hu said it is now worth around 200 million dollars a year – six times the figure for 2001. Witnessed by Guebuza and Hu, Chinese officials signed loan agreements with their Mozambican counterparts. The largest of these is a Chinese government soft loan for 1.2 billion yuan (about $155 million). Interest and repayment terms were not specified when Guebuza and Hu spoke to reporters. A further $40 million comes from the China Eximbank, to be invested in Mozambican public infrastructure.

The Chinese government is also offering Mozambique an interest free loan of $15 million to build a new national stadium. The Mozambican authorities intend to have this stadium ready by 2010, so as to enjoy spin-offs from the football World Cup due to be held that year in neighbouring South Africa.

Hu also pledged Chinese support for the construction of a pilot centre on agricultural techniques to be built in the northern province of Nampula. These agreements, he said, were in implementation of decisions taken at the Forum on China-Africa Cooperation, held in Beijing last November. Speaking at that Forum, Hu promised to double China’s 2006 aid to Africa by 2009, and cancel all debts to China owed by the Least Developed African countries that matured by the end of 2005 (with the exception, of course, of that handful of countries that have no diplomatic relations with China, because they chose to recognise Taiwan instead). The package announced in December also included the sharp rise in African goods that could enter the Chinese market duty free, and the provision of $3 billion of preferential loans and $2 billion of preferential buyer’s credit to Africa between 2007 and 2009.

After the documents had been signed, Guebuza declared “We are sure these agreements won’t respond to all the challenges of our struggle against poverty, but they are valuable in complementing the efforts of the Mozambican people”.

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