MOZAMBIQUE RESPONSE: SOVEREIGN CREDIT RATING FOLLOW-

UNCLAS SECTION 01 OF 02 MAPUTO 000923

SIPDIS
SENSITIVE
STATE FOR AF/S, AF/EPS - TPEREZ
USDOC FOR AHILIGAS
E.O. 12958: N/A
TAGS: ECON EAID EFIN MZ OPIC
SUBJECT: MOZAMBIQUE RESPONSE: SOVEREIGN CREDIT RATING FOLLOW-
UP

REF: STATE 144531


1. (SBU) Provided below is Post's response to Reftel request
for input on Mozambique's Sovereign Credit Rating (SCR).

I. LOCAL SUPPORT FOR SCRs:
a. The Government of Mozambique (GRM) maintains a strong
interest in retaining and updating its SCR. The Government,
through the Ministry of Planning and Finance, cooperated
fully with Fitch Ratings in providing all necessary
information for the rating to be assigned (accomplished in
July 2003).
b. Enthusiasm for the rating can be described as average. In
discussions with Domingos Lambo, Deputy Director, National
Directorate of Planning and Budget, Ministry of Planning and
Finance (MPF),it is clear the GRM perceives benefits to
having an SCR. Most importantly, the rating allows foreign
investors to easily obtain macroeconomic data on Mozambique
and formulate investment decisions. Additionally, access to
consolidated data allows the GRM to assess its own economic
status and plan economic and financial reforms to make
further progress.
c. The GRM indicates that it would like to participate in
the SCR annual maintenance program. Lambo stated the GRM's
budget will support this, but fears Mozambique will not have
the capacity to provide annual statistics to keep the rating
current. Mozambique has not developed an efficient,
comprehensive system for collecting data and suffers from an
acute lack of information, especially from areas outside of
the capital city of Maputo. Formerly, the Ministry of
Planning and Finance used to collect economic and social
data but this function moved to The National Institute of
Statistics (INE),after its creation.
d. Local private sector businesses are supportive of the SCR
rating process because it sends a "macroeconomic message" on
Mozambique's economic and financial standing relative to
other countries in Sub-Saharan Africa. Additionally, a good
rating, such as Mozambique received (B/B+) makes investors
more confident of their investment decisions.
II. IMPACT ON GOVERNMENT POLICY
e. An African success story in terms of rapid political and
economic achievement since the end of the civil war (1992),
the GRM continues to shape policies that will lead toward
further growth and development. The GRM has made improving
the quantity and quality of its economic indicators an
explicit goal. Lambo clearly stated that improving
indicators, such as the SCR, is a GRM priority. In the early
90's, Mozambique had no statistical economic data. In 1994,
post-civil war, the Ministry of Planning and Finance
formulated four economic indicators to help paint a picture
of the Mozambican economy. Currently, Mozambique has over 70
indicators/classifications that more accurately represent
the economy on several levels. The World Bank and the IMF
are working with INE to strengthen the institution's
capacity to collect more detailed data across the 128
national districts. Economic and social indicators translate
directly into the GRM's number one policy priority, reducing
absolute poverty in Mozambique. There is a push to improve
economic and social ratings so the current government may
prove effectiveness in raising Mozambican quality of life.
National elections in Mozambique are scheduled for December

2004. Economic, financial, and social improvements in
international ratings provide wins for the current ruling
party who will fight to remain in power post-2004.
f. The GRM is cognizant that it is not as competitive
regionally as some of its neighbors, such as South Africa
and Botswana. However, Mozambique is competitive with
nations such as Malawi and Zambia and seeks to improve
international credit ratings, such as the SCR, to gain this
edge.
III. DEVELOPMENT IMPACT
g. It is unclear if the SCR has been a factor in attracting
FDI to specific investment projects in Mozambique. Large
projects such as the MOZAL Aluminum Smelter and the SASOL
natural gas pipeline choose to operate in Mozambique because
of the large-scale availability of natural resources and the
provision of "export processing zones" as granted by the
GRM.
IV. UNDP/S&P PROGRAM
i. The GRM believes that having multiple ratings is
beneficial to attracting further investment. It is the
policy of the Minister of Planning and Finance (also acting
Prime Minister),Luisa Diogo, to take measures that will
"sell the image of Mozambique" to outsiders. Positive
ratings will allow Mozambique to display its relative
advantages to foreign investors.

V. CURRENCY ZONE RATINGS
k. Mozambique shows interest in currency zone ratings, but
believes the most effective way to "sell the region" is
through statistics published by SADC.
LA LIME