Mozambique says causes for rating downgrade resolved

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Mozambique says causes for rating downgrade resolved

10:43 CAT | 29 Jun 2023

FILE - For illustration purposes only. [File photo: Lusa]

The Mozambican government said on Tuesday that the country’s credit rating was downgraded due to pressure caused by the state’s salary reform, which had been corrected in the meantime, and conditions to fulfil its debt service obligations maintained.

“The recent assessment of the country’s ‘rating’ was based on a retroactive framework, especially in the first months of the year, a period in which the impact of the salary reform was very high,” Mozambican Minister of Economy and Finance, Max Tonela, told a press conference in Maputo.

The minister expects that “from the month of July the accounts will be back on track, according to the established projections”, emphasising that the government’s compliance capacity is solid following the corrections of flaws detected in the Single Salary Table (TSU).

Last week, the financial rating agency S&P lowered the rating of debt issued in local currency to ‘default’ for 24 hours, reflecting delays in payments between February and May.

The agency then placed the rating at a level below what it was before the temporary default.

READ: https://clubofmozambique.com/news/mozambique-lc-ratings-temporarily-lowered-to-sd-on-delayed-payments-ccc-fc-ratings-affirmed-239631/

“For this year, we have, from the point of view of repayment of capital and interest” on internal and external debt, resources estimated at US$1.5 billion and, “at this moment, US$764 million have already been paid by the state,” Minister Tonela said yesterday.

The amount already disbursed for debt service corresponds to 48% of charges projected for this year under this heading, Tonela emphasized.

“The government already has the conditions to continue fulfilling” its obligations with internal and external creditors, he reaffirmed.

In addition to corrective measures in the salary reform, Tonela added, the executive is also intending to diversify its sources for financing expenditure.

The Minister of Economy and Finance underlined that the country’s economy is following a growth trajectory apparent since last year, with gross domestic product (GDP) growth expected to reach 5% this year, up from 4.1% in 2022.

Source: Lusa