Moody’s, a leading financial firm, has shifted Mozambique’s economic outlook from positive to stable.
The change anticipates further delays in both domestic debt payments and planned reforms.
Experts at Moody’s indicate that Mozambique will likely face ongoing fiscal issues and financial difficulties.
These challenges stem from limitations in the country’s ability to manage its debt and finances, leading to expected delays in repaying what it owes.
The company maintains Mozambique’s rating at Caa2, a subpar investment grade. This reevaluation highlights that financial stress will likely continue.
Contributing factors include the need for public wage reforms, security issues in the north, and upcoming elections.
In addition, the government will likely struggle with liquidity, given the tough timelines for repaying domestic debts.
Moody notes that Mozambique has little room to cope with unforeseen shocks, including climate-related crises.
These can add extra stress on its ability to service its debt.
The firm suggests that the country could again delay debt payments. These delays could especially happen if unexpected external factors strain finances.
However, this risk offsets some positive changes seen earlier this year.
At that time, the outlook improved due to the promise of a developing Liquid Natural Gas sector and some progress on reforms backed by the IMF.
Moody’s adds that while some good trends persist, implementing effective reforms will take longer than initially thought.
Consequently, no rating improvement for Mozambique is likely in the foreseeable 12 to 18 months.
Background
In recent history, Mozambique showed potential for economic growth, mainly due to its developing natural gas sector.
Hopes were high when large gas reserves were discovered, attracting significant foreign investment.
However, the country has faced numerous setbacks, including natural disasters and ongoing internal conflicts.
These obstacles have made it difficult for Mozambique to fully capitalize on its natural resources and implement vital reforms.