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Election Tensions Spark ‘Mistrust’ Among International Investors, Pushing Mozambique Bonds to Biggest Fall Since April

Election Tensions Spark ‘Mistrust’ Among International Investors, Pushing Mozambique Bonds to Biggest Fall Since April

Mozambique’s dollar-denominated bonds maturing in September 2031 posted their longest losing streak since April, falling for the fifth day in a row at a time when the climate of political instability caused by the 9 October elections is growing.

The pressure on the financial market has increased, with analysts warning that the climate of uncertainty could continue to keep investors away and worsen the country’s economic difficulties, reports the financial information agency Bloomberg.

Last Wednesday (23), Mozambican bonds fell by 1.987 US cents to 83.917 US cents, bringing the yield to almost 13 per cent. This fall places the country among the worst performers in the emerging markets, at a time when political tensions are rising due to the release of the election results, which gave victory to Daniel Chapo, the Frelimo party’s presidential candidate.

‘I think the losses could continue, especially if the political unrest continues, as investors are questioning the stability of the country,’ said Thys Louw, portfolio manager at Ninety One UK Ltd.

Since last weekend (19 and 20 October), demonstrations have taken place in several Mozambican cities, including Maputo, following the murder of lawyer Elvino Dias, who was representing Venâncio Mondlane, the independent presidential candidate, and the national leader of Podemos, Paulo Guambe. Mondlane, who claims to have won the elections, called for the country to come to a standstill this Thursday and Friday (24 and 25 October), in protest against what he considered to be ‘a fraudulent electoral process’.

Police used tear gas to disperse the protests, and riot police units were deployed to control the situation. Burning barricades were reported after a march called by the Optimist Party for the Development of Mozambique (Podemos), further intensifying the climate of instability.

In addition to political issues, Mozambique continues to face significant challenges in its economic sector. The country, which has been repeatedly affected by tropical cyclones and corruption scandals, has also been facing an armed insurgency in the northern province of Cabo Delgado for several years.

The clashes, associated with groups linked to Islamic State, have weakened the army and resulted in the suspension of natural gas projects by oil giants such as TotalEnergies SE and ExxonMobil Corp.

‘This fall places the country among the worst performers in the emerging markets, at a time when political tensions are rising due to the release of the election results’

‘Electoral instability will only bring further delays to energy infrastructure projects, which are crucial to Mozambique’s economic future,’ points out Florence Schmit, an energy specialist at Rabobank. The resumption of TotalEnergies’ LNG project in Cabo Delgado province is conditional on a peaceful presidential transition and the stabilisation of the security situation.

Mozambique, ranked among the least developed countries in the world, ‘is at a crossroads, where a swift resolution of the political crisis will be key to restoring investor confidence,’ he points out.

As long as the election results are not confirmed by the Constitutional Court and tension continues to rise, the perception of international markets will be reflected, especially in bonds, which will remain under pressure. For analysts, the way the political situation unfolds in the coming weeks could be decisive for the country’s future, particularly with regard to strategic investments in energy and infrastructure.

Treasury Bonds are essential financial instruments for the Mozambican government, serving as medium and long-term loans that are fundamental for managing the country’s debt. These bonds are instrumental in managing public debt, financing budget deficits, refinancing existing bonds and replacing higher-cost securities.

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