Johannesburg - Mozambique’s budget deficit may widen to 12 percent of gross domestic product this year, which is negative for the nation’s credit outlook, Moody’s Investors Service said.

The expansionary fiscal policy to pay for infrastructure projects and maritime safety will boost the government’s debt to 47 percent of GDP this year and 50 percent next year from 44 percent in 2013, Moody’s said in an e-mailed statement today.

Standard & Poor’s lowered the nation’s credit rating by one level to B on February 14, citing a surge in debt and lack of transparency after the government sold an $850 million bond to fund fishing vessels and patrol boats.

Moody’s rates Mozambique’s debt at B1, four levels below investment grade and one level higher than S&P’s rating.

“Given the size and and composition of the country’s debt at present, substantial projected primary deficits weigh on our view on the government’s debt trajectory,” Moody’s said.

The widening fiscal gap is outweighing the benefits from faster economic growth, the ratings company said.

Mozambique has one of the fastest-growing economies in sub-Saharan Africa as coal and gas production increases, with expansion estimated at 8.3 percent this year, up from 7.1 percent in 2013, according to the International Monetary Fund.

Political unrest in the run-up to the October elections could disrupt coal exports, which will affect economic growth and government revenues, Moody’s said.

Mozambique’s currency, the metical, has dropped 4.6 percent against the dollar this year, the fourth-worst among 24 African currencies tracked by Bloomberg. - Bloomberg News