The financial rating agency Standard & Poor’s said that Mozambique will see significant gains from the gas projects from 2028, but will face major challenges, including a sharp increase in debt payments.
According to S&P, the Mozambican economy will see gains after the start of the major gas projects in 2028, but the government will face political challenges. Despite relatively high economic growth between 2022-23, the improvement in public finances has yet to materialize, and the country continues to face high levels of poverty and underdevelopment.
Analysts estimate that the economy will grow by an average of 5.5% a year between this year and 2027, but warn that growth is concentrated in the extractive sector and in the construction of Area 1 of the TotalEnergies gas project in the north of the country.
The government’s capacity to reduce civil service spending is limited, and the country is already facing an increase in external debt costs, due to the agreement with investors holding public debt bonds at the end of the last decade.
On Friday (19), S&P decided to keep Mozambique’s rating at CCC+, pointing out that the good prospects for gas exports from 2028 onwards are offset by the current high financial risks.
The agency said that Mozambique continues to face liquidity challenges, with delays in payments to creditors in 2023 and accumulating delays in payments to suppliers and contractors.
Despite the measures implemented by the government to improve the management of public accounts and consolidate finances, the risks of budget slippage persist, due to the high costs of salary reforms, expenses related to climate shocks, rising debt servicing costs and expenses for this year’s elections.
