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Fitch maintains Mozambique’s rating at CCC but worsens economic forecasts

In its latest rating assessment on August 1, the Fitch agency noted that growth forecasts have been adjusted to 3.4% in 2026 and 4% in 2027. This revision is largely driven by the anticipated resumption of the $20 billion (17.2 billion euros) Liquefied Natural Gas (LNG) megaproject by TotalEnergies in Area 1 of the Rovuma Basin in Cabo Delgado, which has been on hold since 2021 due to terrorist attacks. The project is expected to restart in the fourth quarter of 2025.

The real GDP growth is projected to slow down significantly to 2.2% in 2024, compared to 5.5% in 2023, primarily due to the wide-ranging negative impact of post-election violence on economic activity in the last quarter of the year. Growth is expected to increase only slightly to 2.5% in 2025, reflecting a contraction in the first quarter and the dampening effects of foreign currency shortages on business activity, the assessment states.

A CCC rating is the final tier before Financial Default on the Fitch scale.

In the previous assessment on February 7, Fitch downgraded Mozambique’s rating to CCC and also worsened the macroeconomic forecasts following post-election protests, initially predicting economic growth of 3.2% for this year, which has now been revised further downward.

The February decision to lower Mozambique’s rating to CCC, reaffirmed in August, considered financial constraints, high risks in servicing domestic debt, widening budget deficits, high public debt, political and social unrest, as well as a slowdown in economic activity and uncertainty regarding foreign currency reserves and the resumption of natural gas projects.

In Fitch’s assessment, analysts expressed concerns over the widening Mozambican budget deficit, following months of social unrest after the general elections on October 9, and the suspension of the support program with the International Monetary Fund (IMF). Additionally, the swapping of domestic debt issuances, central bank loans, and short-term financing are being used to pay off debt, while significant financing needs pose a considerable vulnerability.

Furthermore, the fiscal deficit increased to 4.9% of GDP in 2024, up from 2.1% in 2023, mainly due to a drop in subsidies and some impact of post-election violence on revenue collection. However, Fitch predicts that the deficit will decrease to 3.4% of GDP in 2025 and 3.6% in 2026, largely due to reduced expenditures.

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