Moody’s downgrades Mozambique

Moody's Investors Service said it downgraded Mozambique's issuer and senior unsecured debt ratings to Caa3 from Caa1, concluding the review initiated on May 20.

The outlook is negative.

Moody’s said the downgrade reflects the following key drivers:

• The ongoing negotiations over the restructuring of a state-owned company's loan, which carries a government guarantee, indicates a weaker government willingness to honor its debt-related obligations when faced with liquidity pressures. This restructuring will likely result in a loss for the lender(s) relative to the original promise and in a default of the government on its debt guarantee, under Moody's definition; and

• Despite the positive impact of this restructuring on the government's cash flow, strong liquidity pressures will remain. In particular, Moody's expects that some of the aid disbursements that had been suspended will not resume in the foreseeable future, outweighing the liquidity relief anticipated by the restructuring.

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