Moody’s further downgrades Mozambique’s sovereign debt rating

11 July 2016

Moody’s downgraded Mozambique’s sovereign debt credit rating from “Caa1” to “Caa3”, further adding to the assessment that the country’s treasury bonds are highly speculative debt, the credit rating agency said in a statement Friday.

With this decision, which further adds to Moody’s discouragement to investment in the country’s debt, Moody’s concludes the review it began on 20 March, after Mozambique disclosed undeclared debts of over US$1.4 billion.

The downgrade of Mozambique’s sovereign risk primarily reflects the agency’s opinion of the “weak will of the government to honour its debt commitments, given the pressures it faces in terms of liquidity.”

Mozambique is currently negotiating with the creditors of Mozambique Asset Management (MAM), which failed in May to pay the first installment of US$178 million on a state-backed loan, which Moody’s says could result in a postponement of payments and losses to creditors.

“Such a restructuring would amount to a default by the government on the State guarantee granted on this loan,” said the agency.

Moody’s also gave the country’s credit rating a negative outlook, which indicates that there may be a further downgrade in the future because of the risks of litigation and the possibility that Mozambique may also default on other debt securities. (macauhub/MZ)