Standard and Poor's downgrades Mozambique’s credit rating outlook - CNBC Africa

Standard and Poor's downgrades Mozambique’s credit rating outlook

Southern Africa

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The international credit rating agency downgraded Mozambique’s rating outlook after the country’s government revised economic data, pushing their current account gap to 37 per cent of GDP, which was wider than expected.

The downgrade was also spurred on by Mozambique’s significant reliance on foreign donors.

“On the one hand you are still dependent on donor funding but on the other hand you have growing finance investment coming from international companies investing in projects such as coal and gas.  But the point is Mozambique needs to balance its own budget in order to have its accounts balancing,” Mediacoop chairman and CEO Fernando Lima told CNBC Africa on Thursday.

“So not, for example, this year to be dependent on occasional funding coming from outside, from companies that have sold some assets related to gas, and that’s what had come to rescue some deficit in the local budget. This reflects the shortcomings of Mozambique’s economy as it enters this new level of economic growth.”

According to Lima, Mozambique’s Minister of Finance Manuel Chang does however have reason to be positive about the country’s economic direction, because not only are the new revenues related to gas contribution coming into the budget but more contributions are expected.

“A significant inflow of new investment is expected to come to Mozambique and again, related to natural resources, and that’s how the Ministry of Finance believes that it will be able to improve its budget deficit.”

The downgrade has had an important impact on Mozambique’s government and authority, prompting them to review their relationship with donors.

Mozambican authorities will also have to carefully monitor budget deficit figures, as well as investment inflows coming into the country in order to align finances according to international standards.