Mozambique: Business confederation sees S&P upgrade boosting external financing

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Mozambique: Business confederation sees S&P upgrade boosting external financing

12:16 CAT | 27 Nov 2019

File photo: O País

The president of Mozambique’s Confederation of Economic Associations (CTA), the country’s largest employer association, said on Tuesday that Standard & Poor’s decision to upgrade it from the ‘default’ rating means more scope for external financing.

“It’s good [news] because it makes room for more funding from outside,” the CTA’s president, Agostinho Vuma, told journalists in Maputo. “There are [Mozambican] entrepreneurs who can easily get funding.”

Vuma was speaking after Standard & Poor’s (S&P) became the third of the three largest rating agencies to take Mozambique out of the financial default category (or ‘default’), added that the news caught private sector companies by “surprise.

He also said that foreign investors look at the Mozambique market through the lends of financial rating agencies and the World Bank’s ‘Doing Business’ ratings, and that there is thus a need to “capitalise from the point of view of securing external and internal credit.”

Standard & Poor’s last week upgraded Mozambique’s credit rating to CCC+ from the previous ‘default’ category and described the development outlook for the country’s economy as stable.

The move came in the wake of the government’s completing an exchange of ‘problematic debt’ securities. As a result, the agency said, it was upgrading the rating for in short- and long-term debt issued in foreign currency, from SD (selective default) to CCC+/C and that for debt issued in domestic currency to B-/B.

In its statement, S&P’s projected a slowdown in the country’s economic growth to 2.5% this year, following the impact on agriculture, electricity production and port facilities of major cyclones in March and April. It sees the ratio of public debt to gross domestic product rising to 116.2%.

Source: Lusa