Mozambique: Public debt reaches 1,100 billion meticais – AIM

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Mozambique: Public debt reaches 1,100 billion meticais – AIM

7:05 CAT | 28 May 2025

FILE - For illustration purposes only. [File photo: Notícias]

Mozambique’s public debt reached 1,100 billion meticais (16.7 billion dollars at the current exchange rate) over the last quarter of 2025, corresponding to a growth of 2.7 per cent compared to the previous quarter.

According to the Quarterly Bulletin on Public Debt, published by the Mozambican Finance Ministry, the growth in the debt corresponded to 78.9 per cent of the country’s Gross Domestic Product (GDP).

“The increase was mainly driven by the domestic debt, which climbed by 8.9 per cent, reflecting a growing dependence on short-term financing mechanisms, such as advances from the Central Bank and Treasury Bills (BT’s)”, reads the report.

The bulletin claimed that, although the country had managed to reduce slightly its foreign debt by 1.2 per cent, thanks to the fulfillment of obligations and focus on concessional financing, “the growing weight of the domestic debt raises serious doubts about fiscal sustainability in the medium term.”

According to the document, domestic debt already represents 41 per cent of the total debt stock and is growing under more onerous conditions, “putting the state into a cycle of refinancing with ever higher costs.”

“These liability management operations, although necessary, have proved adverse and contribute to greater budgetary rigidity. Half of the domestic debt is concentrated in short-term securities, a clear refinancing risk in the event of economic shocks”, reads the document.

In turn, foreign debt, although mostly contracted at fixed rates and in currencies such as SDR (IMF Special Drawing Rights) and US dollars, was not exempt from pressure “and debt servicing soared 78.7 per cent in a single quarter, reaching 210.34 million dollars. This increase is the result of the settlement of arrears but also highlights the limitations of an indebtedness model that remains vulnerable to exchange rate fluctuations and external demands.”

“The situation becomes even more delicate in a context of weak domestic revenue, post-election instability and inflationary pressures. With the budget deficit being covered mainly by expensive, short-term domestic debt, Mozambique is heading down an unsustainable fiscal path unless structural reforms – such as broadening the tax base and greater discipline in public spending – are implemented as a matter of urgency”, reads the report.

“The risks to macroeconomic stability remain high. Without a more prudent borrowing strategy and serious reforms in the management of public finances, the country could face growing difficulties in maintaining solvency and financing its development”, it warns.

Source: AIM