Fitch Ratings raises Mozambique’s sovereign debt outlook

23 July 2012

Credit rating agency Fitch Ratings Friday raised its outlook on Mozambique’s sovereign debt in foreign currency from stable to positive, due to more prudent fiscal and monetary policies that the country has implemented over the last decade.

In the same report the agency, which noted the country’s high growth levels and even higher projected growth due to exploration of natural resources, kept Mozambique’s long term debt rating in local currency at “B+” with a stable outlook and the short term rating in local currency at “B”.

Noting that the fastest growth would be bolstered by coal mining, as Mozambique may become one of the largest African coal producers, it said that expansion of the mining industry would be a new source of revenues for the State and would help to diversify export products and attract foreign direct investment (FDI).

The recent discovery of large deposits of natural gas in northern Mozambique, in the Rovuma basin, is also expected to give a significant push to tax revenues which, as they are only expected in the long term, were not included in the Fitch analysis.

In its statement the agency noted the progress made by the Mozambican government in its macroeconomic management and consequent growth of the economy and added it was necessary to complement this with improvements to the business climate as well as reducing levels of poverty.

According to Fitch Ratings, Mozambique’s budget deficit is expected to remain high at around 6 percent over the next three year due to increased social and capital expenditure, which will be partially offset by an increase in tax revenues from coal mining and exports. (macauhub)