Credit rating agency Standard and Poor’s (S&P) lowered its rating on Mozambique’s economy from “B+” to “B” both for long term debt in local currency and in foreign currency, according to a statement issued Friday.
However, S&P confirmed its outlook on the country as stable and maintained the short term rating at “B”.
The reasons for the decision are that “increases in public spending in Mozambique have resulted in higher budget deficits with resulting accumulation of more debt than previously expected.”
S&P took into consideration state-approved commercial loan of US&850 million, which is the equivalent of 5 percent of Mozambique’s gross domestic product (GDP), to fund the acquisition of six patrol ships.
S&P added that the government’s plans to increase infrastructure spending, as well as salaries, electoral logistics, marine security and development meant that spending would reach a peak of 40 percent of GDP in 2014.
A rating of “B” means that associated debt is not investment-grade and is considered highly speculative. (macauhub)