Africa-Press – Mozambique. The financial rating agency Moody’s has downgraded its outlook on Mozambique from positive to stable, foreseeing more delays in domestic debt payments and the implementation of reforms.
“The change of outlook reflects Moody’s expectation that Mozambique will continue to face fiscal pressures and liquidity challenges amid institutional capacity constraints over the near to medium term, potentially leading to additional delays in debt repayments, as it will take time for ongoing reform efforts to strengthen the country’s debt and cash management capacity,” analysts write.
In the note that reports on the maintenance of the country’s rating at Caa2, below the investment recommendation level and the outlook downgrade, Moody’s points out that “fiscal pressures will persist in the context of the public remuneration reform, security challenges in the north of the country and upcoming elections, while government liquidity risk will remain elevated given the challenging maturity profile of domestic debt”.
Mozambique, they add in the note released on Friday evening, “has very limited fiscal space to respond to shocks, including climate-related events, which can exert further pressure on debt service capacity”.
Analysts therefore see a delay in domestic debt payments similar to what occurred at the end of last year and beginning of this year as possible, ” particularly in the context of external shocks affecting the liquidity profile”.
The risk of payment delay “counterbalances the positive developments that led to the assignment of a positive outlook in March 2022, which related to the prospects of economic and fiscal gains of a nascent Liquefied Natural Gas (LNG) sector and progress on institutional reforms under the IMF program”.
For Moody’s, “while these positive trends continue, and the government is implementing a number of corrective measures aimed at preventing future payment delays, it will take longer than originally envisaged for the reforms to enhance overall policy effectiveness to a level consistent with a higher rating”.
In consequence, Moody’s revised Mozambique’s outlook from positive to stable, which means that an improvement in the rating is not expected in the next 12 to 18 months.
For More News And Analysis About Mozambique Follow Africa-Press
