Gas pressure

Mozambique’s insurgency raises risk of government debt default

By David Whitehouse

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Posted on April 15, 2021 14:07

Displaced women sit on mats, at a displacement centre in Pemba

The receding chances of onshore liquid natural gas (LNG) production starting on time in northern Mozambique will leave a hole in public finances and increase the danger of a debt default.

The seizure of the town of Palma in Mozambique’s northern Cabo Delgado province by Islamist militants in March burst a bubble of complacency surrounding a major LNG project development. Government forces retook Palma, but French oil major Total withdrew staff from the Afungi Peninsula.

Fitch’s ‘CCC’ rating on Mozambique’s sovereign debt “reflects our view that a default is possible,” says Adrienne Benassy, Fitch associate director for sovereign ratings. Underpinning the rating are high fiscal and external financing needs, scarce funding options and high levels of general government debt, she says.

“Mozambique is short of options to meet the existing repayment schedule – and with this eurobond debt having already undergone a tortuous restructuring process, investor appetite for further negotiation is likely to be muted,” says Sam Maybee, an analyst at Africa Matters in London.

In October

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