Mozambique: Incoming investment can raise rating in financial markets – Minister

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Mozambique: Incoming investment can raise rating in financial markets – Minister

10:37 CAT | 18 Nov 2019

File photo: O País

Mozambique’s minister of trade and industry on Friday said that the entry of foreign investments envision an improvement in the country’s rating in financial markets.

“With the signing of the final investment decision, relating to one of the gas megaprojects plus the financing line supported by the African Development Bank and Portugal, I want to believe that our international rating will still rise,” Ragendra de Sousa said at a press conference in Maputo.

Last week, rating agency Fitch removed Mozambique from the list of countries in financial default, giving it a CCC rating, the third-worst level of analysis, following the restructuring of sovereign debt securities.

“We want financial discipline, analysis of more accurate projects and all this is good for both sides, for the country and investors,” he said.

Asked by Lusa about the recommendation of the IMF that Mozambique’s financing should continue to be based on external donations and highly concessional loans, given the high level of public debt, Ragendra de Sousa suggested a close look at the international capital market.

The IMF’s recommendation was made on Wednesday, at the end of the organisation’s visit to the country.

It is demand and supply that determine the interest rate.

“The IMF is giving an indication: until we achieve debt sustainability, which is a ratio that is reached quickly, any economist knows that these calculations are mandatory,” he said.

ALSO READ: IMF staff concludes visit to Mozambique – Press Release

Ragendra de Sousa stressed that even when Mozambique’s rating was at the lowest level (i.e. default), the final investment decision for gas exploration in Area 1 was signed.

So who does the best risk analysis? According to the minister, between a public official, from the IMF for example, and an official from Anadarko or Total (oil companies), the best risk analysis is done by the private sector. It did it in due course and signed the investments in natural gas exploration.

On the same day that it improved Mozambique’s rating, financial rating agency Fitch considered that the country’s financing options are limited and that an agreement with the IMF would be important to ensure access to financial markets.

Source: Lusa