Credit rating agency Standard & Poor’s (S&P) has reduced its rating on Mozambique’s long term sovereign debt by one level from “CCC” to “CC”, according to a statement issued on Friday.
The review came after the announcement of the government’s intention to undertake a restructuring of its external liabilities, which is considered a default, according to S&P.
S&P classified Mozambique’s sovereign debt with a negative outlook, reflecting its view that the restructuring of bonds with maturity in 2023, “is equivalent to a financial default.”
On 25 October the government of Mozambique officially acknowledged its inability to pay the next instalments of the debts of state-owned enterprises with loans backed by the state, calling for a restructuring of payments and a new financial aid package from the International Monetary Fund (IMF).
Mozambique previously benefited from a process of debt restructuring of US$850 million taken on by tuna company Ematum, also under a state-backed loan, which occurred before more l the disclosure of loans to two other public companies in the amount of US$1.4 billion.
“This succession of defaults demonstrates a weak debt payment culture in Mozambique,” said S&P, also referring to the two companies that benefited from the new hidden loans, Proindicus and Mozambique Asset Management (MAM), which failed in May to pay the first instalment of US$178 million.
A week before Fitch Ratings had announced it was keeping Mozambique’s long-term credit rating unchanged at “CC”, both in foreign currency and in local currency, with short-term debt, both in foreign currency and in local currency, receiving a rating of “C”, one level below “CC”. (macauhub)