Fitch Ratings decided to lower its credit rating on Mozambique from “B+” to “B” with a stable outlook, the agency said recently in a statement.
In the statement, Fitch said Mozambique’s tax profile, “has deteriorated rapidly over the last year, reflecting high budget deficits, a rapid increase in public debt, volatile tax revenue and a payroll increase.”
Fitch Ratings noted the government was making efforts to curb capital spending but warned that fiscal consolidation should be gradual.
Therefore it projects the government deficit at 5.8 percent of GDP in the 2015 to 2017 period, well above the average of 3.6 percent recorded from 2011 to 2013.
The agency noted that public debt had increased partly due to a 40 percent devaluation of the national currency, the metical, but recalled that 80 percent of this debt was denominated in foreign currency.
Therefore, Fitch Ratings expects public debt as a percentage of GDP at the end of 2015 to reach the highest value of the last 10 years with 61.6 percent, compared to 37.6 percent in 2011.
The agency said, however, that despite these difficulties, Mozambique’s economic prospects of Mozambique remain high, supported by investments, a growing workforce and the exploration of vast deposits of natural gas. (macauhub/MZ)