Mozambique to meet creditors in March to restructure public debt - Finmin
The director of Fitch’s sovereign ratings department warned yesterday that Mozambique must resolve the hidden debt case to become an attractive destination for investors again.
In an interview with Lusa during a conference in Lisbon, analyst Tony Stringer said that “if Mozambique can resolve the issue of public finances and improve confidence in its capacity to guarantee this, it will be a relatively attractive destination for external investment.”
The country, he says, “is a regrettable story,” and has been in the Restricted Default (RD) classification of the world’s three largest financial rating agencies since 2016, when previously undisclosed state guarantees to pubic companies were discovered.
This, says the analyst, “reveals significant weaknesses in the management of public finances”.
Despite criticisms of the management of the process that drove Mozambique into default and led to a cut in funding from the International Monetary Fund and international donors, Fitch’s sovereign funds ratings director nevertheless says that there are positive aspects to the Mozambican economy.
“There are good signs in macroeconomic terms: growth is recovering, potential is high due to natural resources and the country is making progress in megaprojects,” Stringer said, noting that “Italian oil company ENI has signed contracts that can provide US$7 or US$8 billion in revenue over the next few years, and Anadarko achieved some agreements with Chinese companies” for the sale of gas sourced in Mozambique.
“The currency is recovering,” he added, referring to the appreciation of the metical since the second half of last year, after one of the steepest devaluations ever seen during the second half of 2016 and the first months of 2017 .
The devaluation of the metical also led to a proportional increase in the ratio of public debt to GDP, he noted. “Another concern is that there is a lot of noise regarding the debt-to-GDP ratio, because a very large proportion of the debt is in foreign currency, and depending on the evolution of the metical, this makes the ratio more volatile,” Stringer said.
“The country’s biggest challenge is to deal with the weaknesses of public finance management in an institutional way, to focus on ensuring that delays in payments to suppliers do not increase because this undermines sovereign debt and, finally, to have an accountable system in which it is clear to external observers where the government’s money comes from, what the debt profile is, and how the payments are made.”Source: Lusa