AON Consultancy moves Mozambique to high risk

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AON Consultancy moves Mozambique to high risk

10:08 CAT | 06 Jan 2017

Traditional fishing boats sail as Mozambique's tuna fleet sits in dock beneath Maputo's skyline, in this picture taken August 15, 2015. Mozambique, one of the world's poorest countries, discovered the reserves off its coast between 2010-2013, offering an opportunity to transform the former Portuguese colony which was ravaged by a 16-year civil war that ended in 1992. Recent signs of reckless government spending and an uptick in political violence have raised concerns that Mozambique could be the latest African country to suffer the resource "curse," in which an influx of petro-dollars suffocates the rest of the economy, encourages corruption and stirs unrest. Picture taken August 15, 2015. REUTERS/Grant Lee Neuenburg - RTX1TA2Z

Lusa (File photo) / A view of Maputo

Mozambique was the only country in sub-Saharan Africa to have political risk, default risk and external transfers move to High rating, according to analysis by AON insurance brokerage.

“The only country that saw a deterioration in its overall rating this quarter was Mozambique, which moved from Medium to High,” the risk consultancy analysts, who draw up a map on the political risk of almost all countries annually, write.

In this quarter’s update, the consultants write that “Mozambique is experiencing a debt crisis worsened by the discovery of government fraud and the subsequent suspension of international funding and assistance, including that from the International Monetary Fund (IMF) assistance program”.

In the country analysis, AON says that risk of “foreign transfer, sovereign default and political violence have all been raised to High since last quarter”.

Regarding debts contracted by public companies and hidden from official accounts, AON anticipates difficulties in the short and medium term, not only in the payment of debts, but also for the business environment in Mozambique.

“The ongoing international audit should reveal that current debt levels are unsustainable, which means more debt restructuring is needed,” the report said.

Overall, experts expect “that there will be several debt restructuring exercises over the next few years, which could undermine the business environment for international business”.

The Political Risk Map, whose most recent quarterly update was released yesterday, analyzes about 160 countries and territories using 168 attributes. According to the authors, “Aon’s access to data over the past 19 years helps to track political risk in emerging markets, chart trends, measure risk exposure, and review the potential challenges companies may face in deciding to invest, grow or diversify their business in these markets”.

Source: Lusa