S&P Sees Mozambique’s Post-Election Protests Deepening Debt Risks
TLDR
- Deadly protests in Mozambique post-disputed elections intensify risk of government debt service struggle amid ongoing violence and high debt load.
- S&P Global Ratings downgrades Mozambique's local currency debt to CCC due to fiscal pressures and escalating debt burdens on October 18.
- Economic losses of $390 million and significant GDP impact from violence in Mozambique affecting TotalEnergies' $20 billion LNG project progression.
Deadly protests in Mozambique following disputed elections are amplifying risks that the government may struggle to service its domestic debt. Mozambique’s economy is facing significant strain from ongoing violence, including attacks on infrastructure and trade routes, along with a ballooning debt load.
S&P Global Ratings downgraded Mozambique’s local currency debt to CCC on October 18, citing fiscal pressures and high debt burdens. Analyst Leon Bezuidenhout noted that without sharp fiscal adjustments or windfall revenue, the government may need to consider debt restructuring or delayed domestic payments.
Civil-service salary overspending and security costs in Cabo Delgado province are adding to fiscal pressures, as violence delays the benefits of planned natural gas projects. Economic losses from the turmoil are estimated at $390 million, or 2.2% of GDP, with the situation impacting the progress of TotalEnergies’ $20 billion LNG project.
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Key Takeaways
Mozambique’s economic stability is increasingly fragile as political unrest heightens fiscal challenges. Unable to access international debt markets since 2016, the government has relied on domestic bonds to cover budget shortfalls, doubling local currency debt since 2020. The recent liability-management exercise, offering longer-dated bonds, underscores liquidity concerns turning toward solvency risks as significant maturities approach. Despite a stable exchange rate, the currency’s overvaluation by as much as 40% suggests potential devaluation risks. The International Monetary Fund has pointed to Mozambique’s “de facto stabilized arrangement,” with a backlog of $440 million in foreign-exchange demand as of October.
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