Moody’s analysts have issued a downward revision of the local currency long-term issuer rating due to Mozambique’s significant liquidity problems. These challenges stem mainly from refinancing difficulties and budgetary pressures, exacerbated by political and social unrest following the general elections in early October.
In the statement accompanying the decision to lower the rating of domestic debt issuances while maintaining the external debt at Caa2, Moody’s elaborates that these challenges have led to defaults, including delays in national bond repayments and the initiation of internal debt swap auctions intended to manage maturity profiles. Moody’s describes these swaps as a problematic exchange.
Moody’s decision follows a recent move by Standard & Poor’s, which took an even more severe stance by placing Mozambique’s domestic debt issuances in Partial Default.
At the end of March, the Bank of Mozambique commented on S&P’s decision, warning that pressure on domestically issued public debt continues to worsen, having increased by 11.6 billion meticals (€168.7 million) since the last assessment released by the central bank two months prior.
“The pressure on domestic public debt continues to exacerbate,” noted the central bank in the information concerning the Monetary Policy Committee (CPMO) meeting held on March 26 in Maputo.
They added that domestic public debt, excluding mutual and leasing contracts and overdue liabilities, stood at 447.2 billion meticals (€6.505 billion) at the end of December, marking an increase of 31.7 billion meticals (€461.1 million) in debt issued domestically in 2024.
In the previous CPMO meeting on January 27, the central bank had already highlighted the same pressure on internal debt (as in previous analyses), accounting for 435.6 billion meticals (€6.337 billion) at that time, representing a rise of 11.6 billion meticals (€168.7 million) compared to the assessment released that week.
“This means that we have an almost speculative debt instrument. Being speculative, few investors will want to include this title, this instrument, in their portfolio,” noted the Governor of the Bank of Mozambique, Rogério Zandamela.
