Mozambique: Consultants doubt any change in governance

Mozambique: Consultants doubt any change in governance

File photo: FM

The Oxford Economics Africa consultancy said on Wednesday that Fitch’s improved ‘rating’ demonstrates more confidence in Mozambique but doubts real changes in the country’s governance.

“The improvement in Mozambique’s sovereign credit ratings and the resumption of general budget support from the Bretton Woods institutions are signs that confidence in the government is being restored, which is catalysing more foreign borrowing and investment,” said an analysis paper.

“However, we agree with local commentators” that “little has changed in terms of governance and that there are indications that authoritarianism is indeed on the rise,” it added.

The influx of concessional funding and donations “is very welcome and essential to Mozambique’s efforts to rebuild the war-torn province of Cabo Delgado and finance its budget deficit,” the consultancy noted.

Oxford Economics Africa highlighted the government’s announced plan to apply over €300 million to restore infrastructure in Cabo Delgado over the next three years.

“Mozambique’s government is now expected to use its improved access to external financing to implement reforms to avoid another hidden debt crisis and help stabilise the security situation in the gas-rich northern region,” whose reserves “are critical to the country’s long-term economy, development and sustainability,” it concluded.

Financial ratings agency Fitch on Friday raised its rating on Mozambique from CCC to CCC+, easing the risk outlook on lending to the country.

“Mozambique’s financing constraints have been substantially eased with the US$456 million (€457 million) credit agreement with the International Monetary Fund (IMF),” it said.

Fitch expects the agreement to give the ‘green light’ to other forms of “concessional financing from multilateral partners, including the World Bank, after years of restricted access to external sources of funding following the 2016 hidden debts scandal.

The agency forecasts gross domestic product (GDP) growth to “accelerate to 7.7% in 2024 and remain high until 2026”.

Source: Lusa