Fitch Ratings lowers credit rating on Mozambique to “CC”

Mozambican citizens travel in a crowded van in Maputo

Fitch Ratings downgraded the long-term debt rating in national and foreign currency of Mozambique from “CCC” to “CC”, the agency said in a statement issued Monday in London.
The “CC” rating, according to the scale applied by the agency, means that Mozambique’s debt is “highly vulnerable”, and is represented by “very speculative bonds.”
The downward review of the credit rating to “CC”, which indicates there will be a likely debt default is a result of the Mozambican sate’s disclosure of guarantees granted by by it on loans contracted by public companies, of significant value and with short repayments terms.
A first payment of USD25 million on a loan of US$622 million contracted by Proindicus was made in March while the first payment of US$178 million (of a total debt of US$525 million) of the loan obtained by Mozambique Asset Management (MAM) was made Monday.
The agency said there was uncertainty about MAM’s ability to honour its commitments, and it is possible that the state will have to make the payment, putting additional pressure on the country’s foreign reserves at a time when the members of the group of 14 have suspended direct aid to the state budget.
Last week, when the Minister of Economy and Finance, Adriano Maleiane, went to parliament to talk about the state guarantees he told members of parliament that MAM did not have US$178 million to pay the installment due on Monday and that Ematum is without funds to ensure its operations and wants state support. MDT/Macauhub