Professional Documents
Culture Documents
REPUBLIC OF MOZAMBIQUE
Presentation to Creditors
OCTOBER 2016
CONFIDENTIAL
PRESENTATION TO CREDITORS
Disclaimer
While the Ministry of Economy and Finance of the Republic of Mozambique has used all reasonable efforts to ensure that
the factual information contained herein is correct, accurate and complete in all material respects at the date of publication,
no representation or warranty is made (express or implied) as to the reliability, accuracy or completeness of such
information and no reliance should be placed on such information. In addition, certain historical information set forth
herein is preliminary in nature or based on government estimates, and may be subject to substantial change.
This presentation includes forward-looking statements. You are cautioned not to place any reliance on forward-looking
statements. All statements other than statements of historical fact included in this presentation, including, without
limitation, those regarding (i) implementation of the governments fiscal policies, (ii) provision of financing from the
official sector, and (iii) Mozambiques future macroeconomic performance, are forward-looking statements. These forwardlooking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results,
performance or outcomes to be materially different from those expressed or implied by these forward-looking statements.
These forward-looking statements are based on numerous assumptions regarding the present and future political,
economic, financial and international situation of Mozambique, all of which assumptions are subject to significant
uncertainty and change.
The presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue, or the
solicitation of an offer to purchase, subscribe to or acquire any securities issued by the Republic of Mozambique or any
entities controlled by the Republic of Mozambique.
This presentation has been prepared for information purposes only and no recipient of this presentation should make any
investment decision with respect to any securities, loans or any other financial instrument on the basis of information
contained herein.
The Republic of Mozambique reserves any rights it may have in connection with any of its debt obligations and nothing
CONFIDENTIAL
PRESENTATION TO CREDITORS
Presentation Framework
I
II
III
NEXT STEPS
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PRESENTATION TO CREDITORS
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U.S. $ billion
18
16
% growth
7.1
6.7
7.2
7.1
7.4
8.0
6.6
7.0
14
6.0
12
3.7
10
8
6
13
10
15
16
17
15
12
0
2011
2012
2013
2014
2015
2016F
16.7
16.0
12.0
4,641
10.0
8.0
4,136
3,867
3,503
2,440
2015
2016
4.2
6.0
4.0
2.1
2.3
2.4
2014
2015
2.0
2014
Exports of goods and services
Percent change
18.0
14.0
4,902
Net FDI
3.0
2.0
0.0
2010
U.S. $ million
6,500
6,000
5,500
5,000
4,500
4,000
3,500
6,175
3,000
2,500
4,768
2,000
1,500
1,000
500
2013
4.0
1.0
5.0
0.0
2012
2013
2016
PRESENTATION TO CREDITORS
The metical has depreciated by approximately 70% against the US dollar over the course of 2016, having already
U. S. $ billion
3.5
90
3.0
80
2.5
70
2.0
0.5
40
30
Apr-12
Oct-12
Apr-13
5.0
3.6
3.5
3.0
1.0
50
Oct-11
6.0
5.1
4.6
1.5
60
20
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
4.0
2.5
2.6
1.3
3.1 2.9
2.5 2.0
1.6 1.4
1.4 1.1
2014
2015
2016F
2017F
3.0
2.0
1.0
-
PRESENTATION TO CREDITORS
45%
40%
35%
30.0%
32.2%
31.4%
26.1%
27.3%
31.8%
28.0%
27.0%
25.9%
20%
2010
2011
2012
2013
2014
2015
2016F
General government revenue
General government total expenditure
Source: IMF, World Economic Outlook, October 2016
130.0%
140%
120%
86.0%
100%
80%
60%
43.3%
38.0%
40.1%
53.1%
62.4%
40%
20%
2010
2011
2012
2013
Source: IMF, World Economic Outlook, October 2016
31.7%
30.7%
30%
25%
35.4%
34.0%
2014
2015
2016F
PRESENTATION TO CREDITORS
The exchange rate assumptions used in preparation of the government budget (capped at MET 88.5 per USD 1
four key SOEs (M-Cel, LAM, Petromoz and EDM.) are facing important financial challenges, which represent
Further delays in the implementation of fuel subsidy reform may constitute an additional fiscal risk considering
Potential government intervention in troubled domestic banking sector may entail additional burden for the
budget
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PRESENTATION TO CREDITORS
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
flows of capital
On the back of affirmative final investment decisions, other
investments are expected to follow as the country boasts
abundant natural resources, particularly coal and natural gas
Moreover, since the economy is expanding from an extremely
low base, there are investment opportunities in many sectors
Once the offshore gas projects start generating export
2004
2006
2008
2010
2012
Anadarko
Sasol
20
15
10
0
2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
LNG net exports, bcm (RHS)
Mozambiques growth prospects are promising in the long term, on the back of progress in the
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II
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II
Considerable progress on the drafting of the audit terms of reference (TOR) has been made
The audit will focus on EMATUM, Proindicus and MAM
2
assess a countrys debt-related vulnerability and therefore the risk of debt distress
GDP
Exports
Revenue
Revenue
Exports
40
150
250
20
20
Mozambiques primary objective is to resume relations with the IMF in order to stabilize the
entails putting the government of Mozambiques public and publicly guaranteed debt on a
sustainable path (i.e., meeting the medium CPIA thresholds)
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II
Percent of GDP
110.0%
104.6%
100.0%
95.7%
91.6%
89.2%
90.0%
84.5%
79.9%
80.0%
70.0%
60.0%
63.2%
2015
2016F
2017F
2018F
2019F
2020F
2021F
Multilateral
o/w IMF
o/w World Bank
Bilateral
o/w on-budget
o/w off-budget (on-lending)
Commercial debt
o/w on-budget (former Ematum)
o/w budget (guaranteed debt MAM &
Proindicus)
Total debt
Source: MoF, as of September 2016
4,138
227
2,635
4,255
3,878
377
1,725
% OF TOTAL
40.9%
2.2%
26.0%
42.1%
38.3%
3.8%
727
998
17.0%
7.2%
9.8%
10,118
100%
U.S. $ million
1,000.00
800.00
803.8
826.8
865.5
2017
2018
2019
675.2
770.8
863.7
600.00
400.00
200.00
2016
Multilateral amortization
Bilateral amortization
Commercial debt amortization
Commercial arrears
Source: MoF, as of September 2016; Lazard calculations
2020
Multilateral interest
Bilateral interest
Commercial debt interest
2021
PRESENTATION TO CREDITORS
II
Mozambique
IMF Thresholds
293%
232%
250%
150%
67% 40%
PV PPG external debt / GDP
(2016)
50%
25.0%
44.6%
45%
41.0%
40%
35%
35.0%
20%
15%
32.2%
2017F
IMF threshold
20.2%
17.5%
18.0%
15.0%
12.5%
24.4%
24.5%
2020F
2021F
IMF threshold
2016F
16.1%
10.0%
13.1%
13.7%
2020F
2021F
7.5%
5.0%
2018F
Baseline scenario
20% depreciation
31.3%
30.4%
26.5%
22.9%
20.0%
31.0%
30%
25%
22.5%
38.7%
2019F
10% depreciation
30% depreciation
2016F
2017F
2018F
2019F
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II
DETAIL
Revenues
Expenditures
Grants
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II
2017
2018
2019
2020
2021
Total revenue
186.3
213.6
241.8
274.4
312.5
Total expenditure
(222.4)
(254.2)
(282.9)
(311.4)
(345.9)
14.0
25.5
28.8
27.4
26.0
(22.1)
50.8
(15.2)
64.0
(12.2)
72.2
(9.6)
80.6
(7.4)
87.5
12.7
(5.0)
(10.5)
(15.3)
(16.1)
(9.0)
(10.4)
(11.8)
(12.5)
(13.0)
(6.9)
25.5
(26.2)
33.5
(29.0)
37.7
(34.2)
43.1
(38.1)
51.0
(47.9)
(0.8)
4.5
3.5
5.0
3.2
(9.7)
54.3
40.7
57.2
35.8
81.2
83.3
85.0
86.8
88.5
Grants
Primary Balance
External financing
10
Considering
that the fuel
subsidies
reform is
undertaken
in 2017
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II
remove the subsidies, would further negatively affect Mozambiques payment capacity
U.S. $ million
U.S. $ million
700.0
600.0
591.2
arrears
377.3
500.0
400.0
359.8
300.0
208.3
200.0
54.3
100.0
40.7
57.2
202.1
35.8
0.0
(100.0)
( 9.7)
2017
2018
2019
2020
2021
11
2017
2018
2019
2020
2021 TOTAL
Baseline scenario
(9.7)
54.3
40.7
57.2
35.8
178.3
10% depreciation
(23.8)
33.8
18.0
31.7
5.4
65.1
20% depreciation
(35.5)
16.7
(0.8)
10.4
(20.0)
(29.1)
30% depreciation
(45.4)
2.3
(16.8)
(7.6)
(41.5) (108.9)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
At this time
those fiscal
risks are
difficult to
assess, but
may
materialize
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II
Significant streams of revenues will increase the fiscal space after 2021
Government revenues are expected to significantly increase in the early 2020s, when the energy sector
projects start generating export revenues
Significant revenues will be derived in the form of royalties and other taxes from the projects in the
energy sector
Government revenue is expected to increase by an average US$2,000 million per year between 2021 and 2025
Preliminary estimations indicate revenues as high as US$6,211 million starting from 2023
GOVERNMENT REVENUE PROJECTIONS ASSUMING POSITIVE INVESTMENT DECISIONS IN THE ENERGY SECTOR
U.S. $ million
20,000
18,000
14,177
16,000
17,241
18,226
12,291
14,000
12,000
9,016
10,000
6,211
8,000
6,000
14,931
16,355
4,151
4,000
2,546
2,294
2,566
2,845
3,163
3,525
2016F
2017F
2018F
2019F
2020F
2021F
4,427
2,000
-
2015
2022F
2023F
2024F
2025F
2026F
2027F
2028F
2029F
2030F
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III
NEXT STEPS
a view to restore Mozambiques debt sustainability in the medium to long term and ensure the resumption
of an IMF financed program
Mozambique is committed to undertake consultations with its creditors in line with the following principles:
Transparency
Inter-creditor
equity
Mozambique would welcome formation of one (or several) representative creditors committee(s) to engage in discussions
forward to reaching agreement with creditors on terms compatible with IMF debt sustainability criteria as soon as possible
Investors meeting in London
Presentation of the government payment
capacity and begin dialogue with creditors
October
November
December
Agreement in
principle with
creditors on a
debt resolution
proposal
January
Implementation of the
agreed debt resolution
strategy
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NEXT STEPS
Next steps
Mozambique has appointed Lazard Frres (financial advisor) and White & Case LLP (legal advisor) as its
exclusive advisors to support the debt solution process. Mozambiques authorities, Lazard and White &Case
remain at the disposal of Mozambiques commercial creditors to discuss the content of this presentation
and will be holding consultations regarding the optimal framework for ongoing engagement with
Mozambiques commercial creditors in the coming days
Contact at Lazard:
Michele LAMARCHE, Managing Director - michele.lamarche@lazard.fr; and
Hamouda CHEKIR, Executive Director - hamouda.chekir@lazard.fr
Contact at White & Case:
Ian Clark, Partner iclark@whitecase.com
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