GRi BEF News International 27 –05 - 2000

IMF pressure may force investors to pull out of Mozambique

World Bank says no debt relief for Nigeria

 

IMF pressure may force investors to pull out of Mozambique

Maputo (Mazambique), 27 May 2000.

 

New investors in Mozambique's sugar industry may pull out if the government yields to pressure from the International Monetary Fund to cut off protection for domestically produced sugar. Attracted to Mozambique with the promise that the domestic market for sugar was protected, the investors are now threatening to close down in case government accepts IMF pressure to slash the protection.

 

One of the sugar factories to be affected would be Marromeu sugal mill on the south bank of the Zambezi River. Sabotaged during Mozambique's civil war, the mill has been rehabilitated by Sena Company in which a Mauritian consortium holds majority shares.

 

Sena's manager, Anton de Wal, did not mince his words when he spoke to 'Metical', an independent paper published in Maputo. If the IMF forces an end to the current protectionist regime, de Wal, whose consortium is the largest investor in the sugar sector, said: "We will close our doors in Mozambique."

 

According to him, investors are reluctant to put any more money into Marromeu, since they do not know what position the government is taking towards the IMF demands. The investors "want to finance the industry within a normalised situation," he said.

 

The Sena Company had envisaged a total investment of over 100 million US dollars in Marromeu. So far it has spent 26 million dollars on repairs to the factory and rehabilitation of 2,000 hectares out of the 13,000 hectare plantation. But if the IMF has its way, Mozambique will never see the rest of the money.

 

Meanwhile, a South African company, Illovo, has been investing heavily in Maragra sugar plantation in Maputo province.      

Its planned investment in the sector would amount to 240 million dollars. By the end of 1999, the company had put 110 million dollars in the venture.

 

Mozambique has a quota for sugar exports to the US at a guaranteed price of 400 dollars per tonne.

But what really attracted investors was the promise of the domestic market, which the government protects against a flood of cheap imported sugar from neighbouring countries.

 

The protection mechanism is a reference price for imported sugar of 385 dollars a tonne for brown sugar and 405 dollars a tonne for white sugar. Those who import sugar that is cheaper than the reference price have to pay the difference at the border.

 

The IMF knew all about this, and initially expressed no opposition. Investors started to rehabilitate the sugar mills and the IMF said nothing.

 

However, in November, a visiting IMF team told the government that the protection on sugar should be slashed so that by 2002 it would be no more than 20 percent above the CIF price.

 

Investors protest that by that time they will be nowhere near to recovering their investments. Nor would they be in position to compete with world market prices.

GRi…/     

 

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World Bank says no debt relief for Nigeria

Lagos (Nigeria) 27 May 2000

 

The World Bank has ruled out giving any debt relief to Nigeria, saying only heavily-indebted and poor  countries can enjoy such facility.

 

The bank's vice president for Africa, Callisto Madavo, stated the institution's position at a press conference in Lagos late Wednesday, to round off his three-day visit to Nigeria.

 

"Only HIPC (Highly Indebted Poor Country) members can enjoy any form of debt relief," he said. The World Bank official said that though he recognised the seriousness of the debt problem, the lasting solution to the debt issue was for Nigeria to gain the confidence of creditors.

 

Even then, Madavo wondered why Nigeria was giving so much attention to the external debt at the expense of domestic debt which, he said, was so critical to the economy since poor service of the debt caused high interest rate, crippled growth and stunted employment.

 

He offered the bank's assistance to the country in designing "an effective debt management strategy that would balance fighting poverty and restoring healthy relations between Nigeria and the international financial community."

 

Debt relief, and even outright cancellation, has been a major issue to the administration of President Olusegun Obasanjo, which assumed office in  May 29 1999.

 

Economic experts have argued that servicing the huge external debt, estimated at between 30 and 32 billion US dollars, was crippling the governmen'ts poverty-alleviation efforts.

 

On Monday, the bank granted 80 million dollars credit to Nigeria to support its universal basic education programme, a water project and economic management. The credit grant is repayable in 40 years and is at no interest rate.

 

Before travelling to Lagos, Madavo met with a number of top government officials in Abuja to discuss the country's economic recovery and the need for an agreement with the International Monetary Fund.

 

Agreement with the IMF, it is believed, would encourage other donors to step up their assistance to Nigeria and to help resolve its external debt problem. At a meeting with Obasanjo, he stressed the need for Nigeria to "move on expeditiously on privatisation."

 

He said the government should ensure that the process of privatisation "is transparent and carried out in a way that promotes Nigeria's economic revitalisation and international confidence in the country as a place to do business."

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