The political and social tension that has taken place in Mozambique since the CNE announced the results of the general elections on October 9 poses risks to political stability, fiscal consolidation and economic growth, says financial rating agency Fitch Ratings.

"However, our basic assumption is that the situation will stabilize over time and that external financing disbursements from multilateral development banks will continue, limiting downside risks to the 'CCC+' sovereign rating. A' sovereign rating," says the Fitch Ratings document.

Social unrest has increased since the October 9 elections, after the official results declared Daniel Chapo of the Frelimo party the winner of the presidential election, with many people killed in clashes between demonstrators and security forces.

The demonstrators disrupted activities in the capital, Maputo, and transportation networks, including links between Mozambique and South Africa.

Fitch points out that the worsening of the crisis could lead to an increase in the fiscal deficit, higher than previous estimates.

In August, the agency projected a reduction in the deficit from 4.2% of GDP in 2024 to 3.1% in 2025. However, weakened economic activity, coupled with increased public spending on security and reconstruction, could jeopardize this trajectory.

In addition, the measures to contain the protests, such as the increase in public spending, could jeopardize the fiscal targets agreed with the International Monetary Fund (IMF), raising the country's financing needs, which are already considerably high.

"The sovereign rating could come under downward pressure if access to external financing is restricted or insufficient to meet the government's needs, negatively impacting payments to creditors," the agency warns.

However, despite the instability, Fitch believes that Mozambique will continue to have access to concessional loans from multilateral organizations.

The recent approval, on October 30, of a 54 million US dollar loan by the African Development Bank for a wind farm project reinforces this expectation.

In addition, the IMF's three-year Extended Credit Facility of 456 million dollars should remain intact, barring significant disruptions in meeting fiscal or structural targets.

The agency warns, however, that instability could negatively affect economic growth.

Fitch had projected real GDP growth of 4% in 2024 and 4.2% in 2025, but recognizes that the social crisis could limit economic performance in the short term.

The impact of the social unrest could be more pronounced in strategic projects, especially in the liquefied natural gas (LNG) sector, which is fundamental to Mozambique's economy.

Security in the province of Cabo Delgado, where the largest LNG project led by Total is located, could be compromised, resulting in delays or cancellations in the projects.

The risks to LNG production prospects could also increase if security resources are diverted from restoring social order in the Cabo Delgado region, a prerequisite for progress on Total's huge project.

Fitch concludes that the continuity of international financing will depend on the government's ability to stabilize the political and social situation and meet the agreed economic targets.