The placing under observation "indicates that the `ratings' may change as a direct result of the final criteria, does not indicate a change in the underlying credit profile, nor does it affect the current Outlook" of the analysis by Fitch Ratings, owned by the same owners of the consulting firm Fitch Solutions.

The review will take place over the next six months, and the outcome will depend on "Fitch's assessment of the appropriate rating based on the new criteria," and may stay the same, go up or down.

Argentina, Republic of Congo, Ethiopia, Laos, Mozambique, Tunisia, Ukraine, El Salvador, Sri Lanka, Zambia, and Belarus are the countries that the agency assigns a CCC rating, and at the end of the six-month period may see the rating go up to CCC+, down to CCC-, or remain at CCC.

Fitch Ratings' last assessment of Mozambique's debt was made on March 11 this year, with the agency deciding to maintain the rating at CCC and forecasting a growth of 4.5% this year and 8% in 2023 and a decrease in public debt to 104.5% of GDP.

"The CCC `rating' reflects high public debt levels and limited sources of financing, coupled with high external and fiscal financing needs, unresolved public sector debt problems, low GDP `per capita', weak governance indicators, a difficult security situation and vulnerability to natural disasters," reads the note released at the time.

The level of CCC, three levels above Financial Default, means that "default is a real possibility", according to the methodology of this rating agency owned by the same owners of Fitch Solutions.

The debt-to-GDP ratio, Fitch said, is expected to remain high, despite the downward trend, from 112.4% at the end of 2021 to 104.5% this year and 97.6% in 2023.

Still on the public debt ratio, one of the highest in sub-Saharan Africa, Fitch Ratings warns again that an adherence to the Common Framework beyond the Debt Service Suspension Initiative (DSSI), created by the G20 in April 2020, will cause the country to go into `default'.

"The government has not yet made a decision regarding joining the Common Framework beyond the DSSI, something we see as a distinct possibility; comparable treatment by private creditors is likely to be one of the requirements of the agreement, which could affect the issuance of debt due in 2031, and Fitch would likely view the debt restructuring to private sector creditors as a `problematic debt swap' and thus a `default'," the analysts conclude. (Lusa)