Scenario could materialize in 2024 if gas production lags and compromises the expected increase in revenues, says the financial ratings agency.

Moody's financial ratings agency considers that Mozambique is at risk of going into Financial Default again in 2024 if gas production is delayed and compromises the expected increase in revenues.

"Total's decision regarding the suspension of production will not have an immediate impact, but since the repayment of the bonds depends on revenues, the postponement of production and the delay in revenues could be the trigger for a new 'default'," said the director of the sovereign risk analysis group at financial rating agency Moody's.

In an interview with Lusa, Marie Diron stressed that "there is still time [to avoid default], because as the payment of the bonds becomes more expensive as of 2024, there are several years for the government to reassess the sources of financing," but warned that "taking into account the previous history of the government, there is a risk and that is why the rating is low," being currently at Caa2, near the bottom of the sovereign credit quality assessment scale.

The debt restructuring that Mozambique undertook following the so-called 'hidden debt scandal' decreased the interest payable until 2023, but almost doubled the installments, from 5% to 9% a year, starting that year, which was the time when natural gas exports were expected to begin, whose tax revenues would support the increased costs.

Armed groups have terrorized Cabo Delgado since 2017, with some attacks claimed by the 'jihadist' group Islamic State, in a wave of violence that has led to more than 2,500 deaths according to the ACLED conflict registration project and 714,000 displaced according to the government.

An attack in Palma, near the gas project under construction by the oil company Total, on March 24 caused dozens of deaths and injuries, with no official balance sheet announced.

The Mozambican authorities announced they were in control of the town, but the attack led the Total oil company to abandon the site of the enterprise that was scheduled to start production in 2024 and on which many of Mozambique's economic growth expectations for the next decade are anchored.

Moody's looks at 28 countries in Africa, ranging from A3 from Botswana to Ca from Zambia, and there is a concentration of opinion on credit quality more at the lower end of the scale, "reflecting constraints due to low income levels that make it difficult to be resilient to shocks, fiscal constraints and debt constraints, which was already rising even before the pandemic," said Marie Diron, noting that two-thirds of the outlook 'ratings' are stable.

"This indicates that our view of sovereign credit quality is well positioned for a very gradual and uneven recovery period, with governments needing time to recover their revenue base," the analyst concluded.