Domestic debt undermines State financial management in Mozambique, says Moody’s

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Domestic debt undermines State financial management in Mozambique, says Moody’s

5:42 CAT | 13 Jun 2023

in file CoM

Mozambique’s rising domestic debt and a recent “miscommunication, highlight the challenges of debt management” although maintaining hope in the results of future gas exploration, according to the ratings agency Moody’s.

“Although there is a great deal of willingness by Mozambique to meet its upcoming debt obligations, recent late payments, weak appetite for the domestic government bond market and the rapid rise in domestic debt highlight persistent liquidity problems”, reads the latest document from the agency on Mozambique.

According to the document, “in question is the delay in payment of internal debt coupons between February and March, a period of added pressure on state coffers with the increase in salaries, among other factors”.

Moody’s highlights that a new moment of pressure is approaching, between September and November, with the Government having to deal with coupon payments and repayments of domestic debt.

“In May, the idea of re-examining the profile of these disbursements was mooted,” the agency said, explaining that “the government later rectified the statement, saying that it had been a mistake and that it does not intend to redefine the profile of these instruments”.

Moody’s believes this recent “miscommunication” with holders of national bonds is a sign of weak debt management capacity, which as a result, places Mozambique “in the bracket of high-risk financial instruments.”

Source: AIM