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Mozambique Asset Management, the state-backed company from Mozambique will default on a $535 million loan to build new shipyards to service the country’s budding offshore natural gas industry.
The loan for the firm was backed by the government, meaning the country will be heading for a sovereign default, although because of a grace period, such a classification has not occurred yet.
The financial problems have arisen due to a construction rush to service offshore natural gas drilling that has yet to materialize. With LNG prices having crashed, large natural gas production is probably still a decade away.
East Africa has been described as the next major source of natural gas production and LNG exports, but so far it has failed to live up to the hype. Now Mozambique will pay the price of rushing too quickly.
Undisclosed until now, Mozambique’s debt goes beyond the aforementioned loan. Now that billions of dollars of undisclosed debt has been unveiled, the IMF has suspended its assistance to the country.(source: Oilprice.com)