Mozambique debt servicing to consume 35% of country’s revenues in 2017 – Fitch

Login

Register

http://www.clubofmozambique.com/

Mozambique debt servicing to consume 35% of country’s revenues in 2017 – Fitch

9:22 CAT | 07 Nov 2016

Lusa (File photo)

The credit rating agency Fitch anticipates Mozambique using more than one third of its tax revenues servicing external debt next year, keeping the country in the agency’s ‘at risk of default’ bracket.

“As a percentage of revenue, the Government expects the service of external public debt to increase to around 35 percent in 2017 from an estimated 3.4 percent in 2014,” reads a report released last week commenting on the proposal to restructure foreign debt payments of around US$52.1 billion put to creditors by the Mozambican government.

In a comment on the proposal, Fitch analysts say that it is possible that the extension of debt repayment terms advocated by the Mozambique Ministry of Finance is equivalent to a financial failure, since it changes the payment terms with loss to creditors.

“A potential restructuring of external debt could fulfill the criteria of Distressed Debt Exchange,” says Fitch, noting that “the announcement reflects the significant obligations to the debt which are pending in the short term and the sharp deterioration in fiscal and macroeconomic conditions that followed the release of US$1.4 billion of additional state-guaranteed debt to opaque public companies”.

Under these conditions, the report continues, Mozambique faces “extreme difficulty” paying EUR 803.8 million in 2017, of which EUR 591 million is commercial debt.

For now, the financial rating agency is maintaining the country’s ‘CC’ rating, indicating a “financial default is likely”.

Fitch anticipates “average inflation of 20 percent this year, the highest in two decades” and a slowdown in economic growth to 3.5 percent, the lowest in 15 years, rising to 5 percent in 2017, “but this is dependent on a gradual resumption of external support”.

Source: Lusa