Mozambique mulls asking China to rework US$1.4 billion debt after unrest hits economy

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Mozambique mulls asking China to rework US$1.4 billion debt after unrest hits economy

5:36 CAT | 05 Jul 2025

FILE - Mozambique’s President Daniel Chapo at a press conference at the Sao Bento Palace, in Lisbon, Portugal on Thursday, July 3, 2025. [File photo: Lusa]

China is Mozambique’s biggest bilateral creditor, holding 14 per cent of the country’s external public debt

Cash-strapped Mozambique is open to asking China to restructure the US$1.4 billion it owes its biggest bilateral creditor, President Daniel Chapo said.

The gas-rich southeast African nation’s economy contracted for two straight quarters after disputed October elections triggered violent protests that left hundreds died and saw factories and shops burned and looted.

The unrest hit public revenues, heaping pressure on the state to stay current on debt payments and amplifying questions about sustainability.

Some bilateral creditors have already expressed interest in supporting Mozambique through forgiving debts, Chapo said.

“Rescheduling or even forgiveness of the debt we have with our largest bilateral creditor is not an outlandish idea,” he said, when asked if the nation was considering requesting China to restructure its loans.

“Of course, this will always be done within the framework of partnership, within the existing agreement, as we are a serious country that strives to honor its commitments.”

Fmch.xinhua — FILE – Chinese Foreign Minister Wang Yi (right) meets Mozambican Minister of Foreign Affairs and Cooperation Maria Manuela Lucas in Changsha, central China’s Hunan province on June 12, 2025. [File photo: Xinhua]

If it proceeds, Mozambique would join others in the region – including Ghana, Zambia and Ethiopia – in having to revamp debts pinched by high borrowing costs and crimped public finances.

The Chinese embassy in Maputo, Mozambique’s capital, did not respond to a request seeking comment.

China holds 14 per cent of Mozambique’s external public debt and any negotiations are yet to start, according to the president. Mozambique’s total external public debts stood at about US$9.8 billion at the end of last year.

It has already faced “some additional delays in honoring its commitments” due to liquidity constraints since the start of the year, Chapo said.

In 2025, the government had planned US$239.9 million in external debt servicing, of which it had paid US$120.82 million by May, he said.

“We are going to work with all strategic development partners in order to restructure debt,” Chapo said on the sidelines of an international development financing event in Seville, Spain. “We are always ready to do it because it will ease pressure.”

His government has also asked the International Monetary Fund for a new funded program, after abandoning a previous one earlier this year, saying it did not align with the new administration’s vision. A new deal could be in place within months, he said.

“It’s needed,” said Chapo. “By the conversations we’re having with them, all points to this year.”

Discussions with IMF staff are ongoing, the Washington-based lender said.

“The request comes at a challenging time, as the recent social unrest has adversely affected growth prospects for 2025, with projected growth revised down to 2.5 per cent,” IMF spokeswoman Julie Kozack said.

Source: Bloomberg