(The following statement was released by the rating agency)
LONDON, May 16 (Fitch) Fitch Ratings has affirmed Mozambique's
and local currency Issuer Default Ratings (IDRs) at 'B+' with a
Fitch has also affirmed the Country Ceiling at 'B+' and
Short-term IDR at 'B'.
KEY RATING DRIVERS
The affirmation reflects the following key rating drivers:
Growth has averaged 7%, well in excess of the 'B' median of 4.2%
over the past
five years. It has benefited from the development of
mineral resources, infrastructure investment following the
three-decade long civil war as well as a favourable
environment. Inflationary pressures have abated, supported by a
currency and improved monetary policy.
Developing coal and natural gas reserves will continue to
growth, which is forecast to average 8% over the next three
years, due to
estimated foreign investment of USD5bn (or 30% of GDP) annually.
significant potential, risks emanate from delays in
falling commodity prices and an intensification of political
Mozambique has announced sharply higher budget deficits each
year over the past
four years, rising to 9% in 2013 and 12.8% in 2014 from 5.2% in
concerns about the country's commitment to prudent fiscal policy
- a factor
which contributed towards Fitch's upgrade of Mozambique in 2013.
outturns on average have been 3% of GDP lower than announced,
due to challenges
executing capital projects, lower than budgeted donor inflows as
windfall capital gains taxes from the gas sector.
Windfall capital gains (4.2% of GDP) as well as under spending
projects (3.4% of GDP), sharply reduced the budget deficit in
data show a budget deficit of 3.4% of GDP in 2013, against 9%
September 2013's supplementary budget. The 2014 budget shows the
to 12.8% of GDP. However, due to unbudgeted windfall capital
gains as well as
under spending on infrastructure, Fitch forecasts a lower
deficit of 7.7% of
GDP, albeit still a significant increase from an average 4% of
recorded over the past four years.
Fitch expects government debt as a percentage of GDP to rise to
47.7% of GDP in
2015 from 42.5% in 2012, above the 'B' median of 41.8% of GDP,
and depending on
the execution of public infrastructure investment. Despite
debt levels, interest payments as a percentage of government
revenue remain low
at 2.8%, compared with a 'B' median of 7.8%, due to the highly
nature of Mozambique's debt structure. Government deposits have
risen sharply to
17.7% of GDP. Consequently, net debt is below peers at 25.6% of
ENATUM, a state-owned fishing company formed six weeks prior to
on international capital markets, has highlighted existing
corruption, transparency and fiscal responsibility, with donors
support in response. The bond was purportedly issued to finance
tuna fishing, but a large share of the funds will go to fund
The military wing of Renamo, an opposition party, will continue
on strategic assets ahead of the elections in late 2014, to win
the military and police force as well as changes to electoral
law. A return to
full scale civil war is unlikely; but the attacks may adversely
Mozambique's ability to attract foreign investment.
Low per capita income and human development indicators remain a
on the rating, falling below the 'B' median.
The Outlook is Stable. Consequently, Fitch's sensitivity
analysis does not
currently anticipate developments with a high likelihood of
leading to a rating
change. However, the main factors that individually, or
trigger positive rating action include
- Greater materialisation of the benefits of natural resource
government revenue and exports. This will require adequate
infrastructure to support the development of coal and natural
-A continued track record of economic management supportive of
strong and stable
economic growth and an improvement in per capita income.
- Further regulatory reforms and more effective implementation
improvements in the business environment.
The main factors that individually, or collectively, could
rating action include
- A severe and sustained fall in commodity prices that
external debt sustainability and places the development of the
coal and LNG
sectors in jeopardy.
- A significant weakening in public finances due to rapid
increases in current
expenditure, leading to large deficits and a sustained increase
- An escalation in violence that undermines the business
environment and has a
detrimental impact on exports and investment.
The rating and Outlook are sensitive to a number of assumptions:
- Infrastructure development will continue to facilitate the
expansion of the
coal sector and the development of natural gas.
- There is no return to civil war.
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Applicable criteria, 'Sovereign Rating Criteria' dated 13 August
'Country Ceilings' dated 09 August 2013, are available at
Applicable Criteria and Related Research:
Sovereign Rating Criteria
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