Private capital is unlikely to flow into Mozambique for some time as the country continues to be poorly graded by the major rating agencies. Capital is needed to get freight moving again as the country will then have the foreign exchange needed to pay for imported goods.
In September Fitch Ratings announced it had kept Mozambique’s long-term foreign currency credit rating on “RD” or restricted default. The “RD” credit rating indicates that the debt issuer has entered into financial default, but has not entered into bankruptcy and has not ceased trading. Standard & Poor’s credit rating for Mozambique stands at SD (selective default), although earlier this year it predicted that the economy would grow by 4.5% and that public debt would decline.
Moody’s credit rating for Mozambique was last set at Caa3 (of poor standing) with negative outlook. Credit ratings are used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of a borrower or country. Fitch is forecasting a growth rate of 3.5% in 2018, against 3.7% in 2017. It will take some time to recover, however.
“Economic growth is expected to accelerate from 2022/2023 when the major projects to explore natural gas deposits come online,” Fitch Ratings said. Before that there will be major growth in the demand for project cargo services as the new infrastructure is put in place .
