Mozambique: Country to seek agreement with hidden loans creditors – Fitch

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Mozambique: Country to seek agreement with hidden loans creditors – Fitch

1:15 CAT | 04 Dec 2019

File photo: Macauhub

Rating agency Fitch on Wednesday said that Mozambique will try to resolve its hidden loans, after agreement with creditors of the sovereign debt bonds but warned that high debt hinders any subsequent IMF programme.

“Mozambique will try to reach agreement on debt values by public companies, following the completion of a restructuring of sovereign debt securities,” analysts wrote in a note on the evolution of ratings of sub-Saharan African countries.

Fitch said that the difficulties of a programme with the IMF, which would alleviate the constraints on access to external financing, are still significant because of the high debt.

Fitch recently removed Mozambique from the financial default category, rating it CCC – one of the lowest on the scale, saying that domestic political tensions remain a challenge, but in the medium term the development of massive export capacity for liquified natural gas will improve public finances and growth.

Fitch anticipated that the ratio of public debt to GDP will fall from 101% this year to 93.9% in 2020, while economic growth should accelerate to 5%.

In sub-Saharan Africa, Fitch anticipates that the average ratio of public debt to GDP will stabilise at 55% of GDP next year, which is more than double the 27% recorded in 2012 and a fall of one point from this year.

“The number of African nations where interest payments on debt represent more than 20% of revenues, although unchanged from the last two years, remains at its highest level since 2000, representing a significant risk of ‘debt distress’,” the analysts add.

In the analysis of the main macroeconomic indicators forecast for 2020, Fitch Ratings acknowledged that countries have already absorbed the impact of falling commodity prices, but poor management of public finances, persistent needs for priority infrastructure and pressure to improve public services increase the risks of public debt evolution.

Of the 19 countries that Fitch analyses in the region, including Angola, Cabo Verde and Mozambique, only two have a positive perspective of evolution, and there are three with a negative perspective, one of which is Angola.

Source: Lusa