Mozambique: Good economic outlook, but debt needs to be restructured – analyst

Login

Register

http://www.clubofmozambique.com/

Mozambique: Good economic outlook, but debt needs to be restructured – analyst

2:15 CAT | 27 Sep 2018

Natural gas extraction projects form the basis of a good economic outlook for Mozambique, but only after restructuring its debt will the government be able to access markets, Moody’s analyst Lucie Villa said yesterday.

“The economy is growing, which is interesting, and will continue to grow, because energy projects are progressing and for these energy projects, which are huge, moving forward requires much more investment and this has a great multiplier effect on economy,” she told Lusa on the sidelines of a seminar on sub-Saharan Africa.

But the country’s high debt needs to be restructured before Mozambique can issue new debt, the French economist added.

“It will be difficult for the [Mozambican] government to gain access to international markets because not only is outstanding debt on the international market not being paid, the government is not paying its bonds either,” she said.

Villa, who is vice president and director of the Sovereign Risk Group, the Moody’s department that tracks sovereign debt, says that, regardless of how it is done, the important thing is to reduce debt to a sustainable level.

“This could potentially put some upward pressure on the rating, because if the debt is smaller and easier to pay, for example with longer maturities and lower interest rates, then it’s positive,” she said.

Mozambique currently has a negative rating of Caa3, the lowest of the 101 countries Moody’s covers with the exception of Venezuela, which has a rating of C.

The Debt Committee, which brings together sovereign creditors, proposed in early August that the Mozambican government pay US$200 million of its debt before 2023, and from then on pay the remainder from the tax revenues of natural gas project scheduled to start production in 2022.

According to a source close to the talks, the proposal that the creditors’ committee delivered to the finance minister foresees that the government postpone the payment of 860 million Euros, corresponding to 80% of debt service, until maturity of the bonds in 2023.

The creditors proposal still requires the total payment of the public debt issued, but extends its term, the same source added.

The Debt Committee is composed of a group of creditors that claims to represent more than 70% of total sovereign debt of US$ 727.5 million issued in 2016 following the conversion of the bonds issued by state-backed company Ematum.

Source: Lusa