Financial ratings agency Moody’s believes that the country’s rising domestic debt and a recent “miscommunication, highlight the challenges of debt management,” despite maintaining hope in the results of future gas exploration.
“Although there is a great deal of willingness by Mozambique to meet its upcoming debt obligations, recent late payments, weak appetite for the domestic government bond market and the rapid rise in domestic debt highlight persistent liquidity problems,” reads a note to investors, consulted on Monday, 12 June by Portuguese news agency Lusa.
The rating agency said that “in question is the delay in payment of internal debt coupons between February and March, a period of added pressure on state coffers with the increase in salaries, among other factors.
Moody’s highlights that a new moment of pressure is approaching, between September and November, with the Government having to deal with coupon payments and repayments of domestic debt. “In May, the idea of re-examining the profile of these disbursements was mooted,” the agency said, explaining that “the government later rectified the statement, saying that it had been a mistake and that it does not intend to redefine the profile of these instruments”.
Moody’s sees this recent miscommunication with holders of national bonds as a sign of weak debt management capacity, which as a result, the analysis places Mozambique in the ‘Caa’ level, or in other words, “in the bracket of high-risk financial instruments.
The agreement with the International Monetary Fund (IMF) is spurring reforms and there have already been measures to curb wage bill growth, Moody’s points out, which closes the analysis note on a positive note thanks to expectations of natural gas exploration.
“Notwithstanding these challenges, the positive outlook reflects the medium-term upside potential associated with growth prospects in the liquefied natural gas sector, ongoing fiscal and administration reforms and access to affordable financing under the IMF programme,” concludes Moody’s financial rating agency.
