Fitch Ratings keeps Mozambique’s rating at ‘restricted default’

24 September 2018

Fitch Ratings has kept Mozambique’s long-term foreign currency credit rating on “RD” or restricted default, according to a note released last Friday.

The “RD” credit rating indicates that the debt issuer has entered into financial default with respect to a bond, loan or other issue, but has not entered into bankruptcy and has not ceased trading.

The statement recalls that since Mozambique’s credit rating was revised down to “RD”, the country has already failed to pay four coupons on Eurobonds of the Mozambican tuna company Ematum, as well as both interest and capital repayment of government-guaranteed loans contracted by public companies Proindicus and Mozambique Asset Management (MAM).

Fitch Ratings does not expect a speedy resolution of this problem, given that divergences between bondholders and the government in one restructuring process remain significant.

The agency said that the pressure on prices has been reduced, with inflation now expected to be 4.6% in 2018, far below the 15.1% recorded in 2017, and 6.8% and 8.0% in 2019 and 2020, respectively, reflecting a tighter monetary policy.

Economic growth will remain below the historical series, with Fitch forecasting a rate of 3.5% in 2018, against 3.7% in 2017, but still reflecting an improvement, given that coal production in 2017 contributed almost one percentage point to the formation of the Gross Domestic Product (GDP).

For 2019 and 2020, the agency forecasts rates of 3.7% and 3.8%, respectively, against a background of uncertainties regarding external financing capacity and resolution of problems with creditors.

“Economic growth is expected to accelerate from 2022/2023 when the major projects to explore natural gas deposits come online,” Fitch Ratings said. (macauhub)