Investors who purchased Mozambican debt will suffer losses – Moody’s

1 September 2017

Investors who purchased debt guaranteed by Mozambique should incur substantial losses due to the fact that the country’s government has consecutively failed to pay the associated coupons, indicates the Moody’s agency in an analysis report.

Moody’s vice-president Lucie Villa, senior analyst and co-author of the report, recalls that the Mozambican government has not made payments on various debt instruments since early 2017, “awaiting a restructuring of that same debt.”

The Caa3 risk grade (the next to lowest, besides total noncompliance), with negative prospects, reflects that expectation, Moody’s also asserts, adding that the Mozambican government’s noncompliance “shows a lack of willingness to respect the commitments it contracted.”

The document adds that it is possible that the Mozambican government may intend to force private investors to incur relatively high losses, adding that “such a scenario increases the likelihood that the IMF will be willing to provide financial support.”

Moody’s adds, however, that Mozambique’s long-term economic growth prospects are good, envisaging 4.7 percent gross domestic product growth this year versus 3.8 percent in 2016.

The Caa3 risk grade is the third and last in a set of three that qualifies a country’s debt as having low quality and very high risk of depreciation. (Macauhub)