Mozambique’s Stable Growth and Debt Outlook

Fitch keeps Mozambique’s rating at CCC+, noting debt reduction and growth from LNG projects.

The country faces credit risks due to high debt and governance issues.

However, Fitch sees potential in the LNG sector, predicting 4.5% GDP growth for 2024-2025, supported by a $456 million IMF program.

Debt is expected to decrease from 96.4% to 90.2% of GDP by 2025. Despite some delays in payments, the country has avoided major arrears.

The Central Bank reports a rise in domestic debt, challenging financial management. The LNG sector is a key growth driver. ENI’s Coral South project is at 90% capacity.

TotalEnergies’ Golfinho Atum project will further boost the economy from 2024, despite increasing the current account deficit.

Yet, the economy saw a downturn in late 2023, challenging stability.

Mozambique’s commitment to the IMF program aims to reduce the fiscal deficit to 2% of GDP by 2025.

The country lowered its interest rate to 16.50% to stabilize the economy and control inflation.

Despite governance challenges, security improvements in Cabo Delgado offer hope for post-2024 progress.

The IMF acknowledges Mozambique’s economic potential with better security, signaling a brighter future for gas projects.

Overall, Mozambique’s outlook remains cautiously optimistic. The LNG sector and policy reforms support a stable credit rating.

The new Mozambique Sovereign Fund, fueled by gas revenues and a shift in the 2024 budget towards strengthening the economy and social sectors, along with reforms to improve business conditions, mark significant steps forward.