London, Sept. 23, 2026 (Lusa) - The consultancy firm Oxford Economics believes that Moody's recent downgrade of Mozambique's credit rating reflects «a worrying situation» in public finances, and forecasts a 30% depreciation of the local currency by 2027.
«We are very pessimistic about the macroeconomic outlook for Mozambique, particularly with regard to public finances and monetary stability; the urgent need for a strong currency, which has prompted the downgrades by credit rating agencies, has forced the government to enter into negotiations with the International Monetary Fund (IMF),» the analysts write.
The financial adjustment agreement currently under negotiation with the IMF, according to analysts from the African department of this British consultancy firm, is expected to entail a «devaluation of approximately 30% of the metical» at the start of the first quarter.
The devaluation of the Mozambican currency will «immediately increase the local-currency price of all imports, weaken local purchasing power and put further pressure on prices for households», the analysts warn.
Last week, Moody's downgraded Mozambique's credit rating, leaving it just one notch above default, citing an increased risk of financial default as delays and difficulties in servicing domestic debt have spread to external debt.
«The downgrade reflects the increased risk that the government will restructure its foreign-currency debt to the private sector, including the Eurobond,» says Moody's, adding that «payment and financing pressures that were previously concentrated in the domestic debt market have spread to external debt».
According to Moody's data, arrears on domestic payments at the end of last year rose to $328 million, equivalent to around 1.3% of Mozambique's Gross Domestic Product (GDP).
The downgrade to Caa3 indicates that Moody's anticipates the government will restructure its foreign-currency debt, which could result in a loss of 20 to 35% for private investors, despite Mozambique continuing to pay Eurobond coupons on time.
Commenting on Moody's decision to downgrade Mozambique's rating, Oxford Economics writes that «wages and interest payments already account for around 80% of revenue, whilst principal repayments on the Eurobonds will not begin until 2028», but «the debt profile gives every reason to expect that the government will have to restructure its debt, which Moody's defines as a default».
Moody's decision comes after Fitch downgraded the rating to CC in April, warning at the time that a debt restructuring was likely, and S&P has, since March, rated the country's debt at CCC+, with a negative outlook.
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