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US credit rating agency Moody’s assessment of Mozambique’s sovereign debt reflects the overall weakness of the economy, taking into account both its limited diversification and the strong growth predicted due to the exploitation of natural resources, the agency said on Monday.
Mozambique’s credit profile, Caa3, reflects the economy’s ‘Low’ strength, with its limited diversification and low income per capita only partly offset by the strong growth driven by the exploitation of natural resources”, a note released by Moody’s states.
In the analysis, which seeks to ascertain whether the ratings attributed to several African countries and banks is adequate not only in relation to their peers, but also to economic conditions, Moody’s analysts write that Mozambique’s ‘Very Low’ institutional strength rating is based on its poor ranking in World Governance Indicators and its history of poor governance and financial default.
Meanwhile, the ‘Very Low’ financial capacity reflects high public debt and budget deficits, as well as foreign exchange risks, while the ‘Very High’ susceptibility to risk events caused by liquidity risk results from the country’s extremely limited access to funding.
Moody’s on Monday released a set of analyses of leading economies in Africa, including Angola, Nigeria, Egypt, Mauritius, Saudi Arabia, Oman and South Africa – in what is a periodic exercise.
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