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Portugal cancels Mozambique debt

Portugal has cancelled Mozambique’s remaining debts to Lisbon, estimated at US$ 393.4 million, accumulated from independence until 2 0 05.

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

Negotiations on the debt cancellation had begun in late 2005 and, a few months a go, 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 ac hievements of the Mozambican government in implementing programmes aimed at grow t h and the socio-economic development of the country.

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

Responding, the Portuguese Minister (Teixeira dos Santos) said the debt cancella tion 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 communit y, the International Monetary Fund and the World Bank to cancel debts of the Highly Ind ebted Poor Countries.

Mozambique has been meeting its development challenges and deserved special atte ntion 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 negotiati ons started in 2005, the final agreement was only signed Tuesday because Portuga l itself had been facing a serious financial crisis as a result of its budget def i cit, 6.1 per cent, well above the 3 per cent acceptable to the European Communit y .

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 ha ve lowered our deficit to less than three per cent, we are here, in Mozambique, t o say that we are in a position to cancel the debt”.

Besides this agreement, the two countries also signed other memoranda — a tripa rtite 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 Portugues e 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 ste p up technical assistance in the areas of customs, public purchases, public debt , planning and international relations, taxes, financial inspections, budgeting and public acco unting.

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