IMF's Aisen blames debt for continuing fall in Mozambique's GDP - By Joseph Hanlon
Standard & Poor’s (S&P) says that Mozambique has the highest foreign currency debt ratio in sub-Saharan African and will not return to the markets before an agreement with the IMF is reached.
“At 84 percent, Mozambique has the highest percentage of foreign currency debt compared to total debt, partly due to the issuance of its ‘Eurobond’,” the rating agency analysts write.
According to an S&P report on debt issues planned by Sub-Saharan African countries this year, Mozambique will not return to the international financial markets in 2018 “due to the recent financial default” on repayment of the foreign currency ‘Eurobond’ in 2016 and loans from public companies.
“We do not anticipate that Mozambique will issue debt in the international markets in 2018, we believe that the country will first try to negotiate a programme with the International Monetary Fund,” write S&P analysts.
In total, the S&P report on the public debt of the 17 countries rated by the rating agency in sub-Saharan Africa shows that these countries will be indebted by a further 57 billion dollars this year.
This represents an increase of 7.4 percent compared to the 53 billion debt issued last year and proves that the commodity price crisis, which began in 2014, continues to affect resource-dependent economies’ efforts to balance budgets.
“This rise reflects the increase in issues planned by the major historical issuers South Africa and Angola,” the document reads, which points out that, in the case of the Lusophone country, indebtedness “is partly due to the large depreciation foreseen for 2018 “, while in South Africa the rise is explained by the “weak budgetary trajectory”.
For the rest of the countries, the financing needs will remain relatively stable, reflecting a balance between the slightly more favourable environment in the commodities market and the tightening of the financing conditions resulting from the normalisation of the US monetary policy.
S&P expects total African commercial debt stock to reach US$392 billion by the end of this year, and total debt (including at concessionary rates) to reach US$514 billion of dollars.
The S&P report is in line with concerns repeatedly expressed by IMF Director-General Christine Lagarde, who said in a recent interview that 2018 may be the year the debt problem in Africa comes to a head.
In an interview with the electronic magazine Quartz, Lagarde, when questioned about the danger of the debt problem exploding in 2018, replied: “It may very well be.”
“What can trigger these serious developments are, in fact, the improvements in the advanced economies, namely the appreciation of some currencies, and the tightening of the monetary policy in the United States and perhaps in the Eurozone, which may contribute to increase the burden of debt in certain countries.”Source: Lusa