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Mozambique prevails in UK legal battle against Privinvest ‘tuna bond’ controversy

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In its $3.1 billion case against the Emirati-Lebanese shipbuilder, Privinvest, for allegedly paying bribes in connection with the ten-year “tuna bond” affair, Mozambique has mostly prevailed at London’s High Court.

The southeast African nation filed a lawsuit against Privinvest and its now-deceased owner, Iskandar Safa, claiming that they bought favours with Mozambican officials and Credit Suisse bankers to get favourable conditions on three projects in 2013 and 2014, one of which was to make use of the country’s coastline waters rich in tuna.

Judge Robin Knowles rendered a decision on Monday that was “substantially in favour” of Mozambique. According to Knowles, the country has been taken advantage of by sophisticated institutions and enterprises who ought to have known better.

The judge stated in his written decision that Mozambique is entitled to reimbursement from Safa and the Privinvest group of firms for little more than $825 million.

In addition, the judge awarded Mozambique an indemnity of almost $1.5 billion that it owes bondholders and lenders, minus the approximately $420 million that the nation has already collected.

The trial focused on agreements made between state-owned businesses and Privinvest for bonds and loans from banks, including Credit Suisse, for projects related to maritime security and fishing boats, which were supported by unidentified governmental guarantees.

However, hundreds of millions of dollars vanished, and when the government’s debt was revealed in 2016, donors like the International Monetary Fund momentarily stopped providing support, which led to a crash in currency values, defaults, and financial instability.

“The scale and nature of what was able to happen in this case presented a systemic threat to Mozambique’s economy,” Knowles said in his ruling, although he was also critical of the country’s officials.

Mozambique filed a lawsuit against three of the former employees of Credit Suisse, which has since been acquired by UBS (UBSG.S), opens new tab. Privinvest, Safa, and other employees of the Swiss firm had entered guilty pleas in the US.

Credit Suisse was able to put an end to the crisis that had already cost the bank hundreds of millions of dollars when it reached an agreement with Privinvest during the trial and then reached an 11th-hour settlement with Mozambique in October.

 

Musings From Abroad

Nigeria, China extend $2bn currency swap deal

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A 15 billion yuan ($2 billion) currency-swap arrangement between China and Nigeria has been extended to boost investment and commerce between the two countries.

According to the People’s Bank of China, the agreement is anticipated to strengthen financial cooperation and encourage the wider use of the yuan and naira in bilateral transactions, as reported by Bloomberg and Chinese local media on Friday.

“The agreement is valid for three years and may be renewed upon mutual consent,” the central bank said in a statement.

The bank stated that by lowering reliance on third-party currencies like the US dollar, the currency-swap agreement renewal is expected to strengthen economic linkages, promote investment, and ease cross-border commerce.

When the Central Bank of Nigeria and the People’s Bank of China inked an agreement worth renminbi (RMB) 16 billion (about $2.5 billion) in May 2018, the currency-swap framework was first implemented.

Yi Gang, the former governor of the PBoC, and Godwin Emefiele, the suspended governor of the CBN, signed the deal.

The original agreement was intended to eliminate the need for third-party currencies like the US dollar by giving companies and industries in both nations direct access to the yuan and naira.

“This agreement will provide naira liquidity to Chinese businesses and RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience, and volume of transactions between the two countries,” the CBN had said at the time of the signing.

To promote flexible and varied regional monetary and financial cooperation, including local currency swaps, to ease commerce between the two countries, President Bola Tinubu and President Xi Jinping of China met in September.

The leaders also talked about how currency-swap programs contribute to global financial stability.

Nigeria and China agreed to strengthen international collaboration on financial intelligence, emphasizing anti-money laundering and fighting the funding of terrorism, since commerce between the two nations makes up around 30% of Nigeria’s total trade.

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Musings From Abroad

World Bank suspends loan fees for impoverished countries

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To lower borrowing costs for vulnerable nations, the World Bank has announced the elimination of several loan fees. The action is a component of larger initiatives to increase financial capacity and tackle pressing global issues including inequality, climate change, and economic instability.

This was revealed by the international bank in a statement on Wednesday. The bank has extended its lowest pricing to tiny, fragile nations, removed the prepayment cost on International Bank for Reconstruction and Development loans, and instituted a grace period for commitment fees on undisbursed amounts.

“The bank is working hard to make it easier for countries to borrow and to pay back their loans more easily by removing some fees on IBRD loans,” the financial institution stated.

The financier claims that these adjustments are intended to relieve the financial strain on countries that require development funding the most.

“These measures are designed to make borrowing easier and more affordable for countries facing significant challenges,” the bank said. It added that the reforms align with its vision of building a “better, more efficient, and bigger” institution capable of addressing overlapping global crises.

The World Bank’s larger financial reforms, which include fee eliminations, are intended to boost lending capacity by $150 billion over the next ten years.

As part of the changes, the IBRD’s equity-to-loans ratio was lowered from 20% to 18%, allowing for an additional $70 billion in lending over ten years.

According to the statement, $1 billion was obtained through a guarantee from the Asian Infrastructure Investment Bank, and an additional $10 billion has been released through bilateral guarantees.

“The adjustments to our capital framework reflect our commitment to scaling up resources while maintaining financial stability,” the bank said.

The international lender highlighted that these adjustments are essential to tackling the billions of dollars that are required each year to help fragile governments, fight climate change, and advance digital inclusion.

It did concede, nevertheless, that states and multilateral organisations are insufficient to discharge these financial obligations on their own.

The Bank has created a Framework for Financial Incentives to close the gap, promoting investments in cross-border issues like pandemic prevention, energy access, water security, and biodiversity.

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