In a London press release issued on Friday, Fitch also affirmed Mozambique’s long term local currency debt rating at “B+, with a stable outlook”, while the short term rating in local currency remains “B”.
Fitch says that its “revision of Mozambique's outlook to Positive reflects the country's track record over the past decade of prudent economic policies and strong economic growth, coupled with prospects for accelerated growth supported by natural resource development”.
Thus ratings agency sees the new coal mines in Tete province as the basis for “a further period of robust growth”.
“The expansion of the mining industry will not only provide an important new source of government revenue, but will also help diversify the export base and attract significant foreign direct investment”, says the Fitch release. “A material improvement in government and export revenues stemming from increased mineral output would have a positive impact on the country's rating”.
Fitch does not take the huge discoveries of natural gas in the Rovuma Basin, in the far north of Mozambique into account. They “promise to transform public and external finances in the long term but are beyond Fitch's current rating horizon”.
Fitch adds that “progress on macroeconomic management and strong growth need to be complemented with further improvements to the business environment as well as a continued focus on poverty alleviation and human development. Expanding the infrastructure network, in order to improve the ease of doing business and allowing Mozambique to fully exploit its natural resources is also critical for sustained long-term growth”.
The agency notes that over the past five years the annual growth rate in GDP has averaged seven per cent, and claims that per capital income over the same period has risen by 70 per cent.
However, it expects growth “to slow slightly in 2012 due to the impact of the global slowdown, but the country has space for counter-cyclical monetary and fiscal policies to temper the slowdown”.
Fitch expects donor support for Mozambique to decline, which “poses a modest risk to government finances and will test the government's ability to transition from being heavily aid dependent to a greater reliance on domestic revenue sources”.
“As concessional funding and donor support declines, the government's ability to take on non-concessional loans without harming debt sustainability is important”, it adds. “Public debt is currently in line with peers but is creeping up. The government will need to strengthen debt management, investment planning as well as public financial management and ensure that non-concessional lending is channelled towards projects with a high economic return in order to ensure continued debt sustainability”.
Fitch is regarded as one of the three main credit rating agencies (the other two are Moody’s and Standard and Poor’s).
Post published in: Africa News