On May 27, 2016, S&P Global Ratings lowered its long- and short-term foreign currency sovereign credit ratings on the Republic of Mozambique to 'CCC/C' from 'B-/B'. At the same time, we affirmed our 'B-/B' long- and short-term local currency sovereign credit ratings. We have placed all our ratings on Mozambique on CreditWatch with negative implications.
OVERVIEW
- Mozambique's authorities have disclosed material new information regarding the government's guarantees of the external debt of several enterprises.
- In our view, the nondisclosure of the guarantees' details until now highlights Mozambique's institutional shortfalls and weak debt management culture. We now consequently factor in the reported guarantees in our estimates of general government debt and debt servicing costs, both of which have increased markedly.
- Moreover, we think the recent disclosures will prompt a pronounced interruption in official foreign financing available to Mozambique over the coming months.
- We are therefore lowering our foreign currency ratings on Mozambique to 'CCC/C' from 'B-/B' and affirming our 'B-/B' local currency ratings. We are also placing all the ratings on CreditWatch negative.
- The CreditWatch mainly reflects our view of an increasing risk of Mozambique defaulting on its debt, either as a result of higher-than-expected debt service obligations, or due to acceleration clauses in the government's external commercial debt. We also factor in our current lack of visibility on the full amounts and terms of the previously undisclosed government guarantees.
