Mozambique: High debt will be sustained by gas exports – IMF

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Mozambique: High debt will be sustained by gas exports – IMF

7:00 CAT | 16 Oct 2023

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

The International Monetary Fund (IMF) said on Sunday that Mozambique’s debt is at high risk of over-indebtedness but is considered sustainable due to the significant revenues that will come from gas later in the decade.

“The Debt Sustainability Analysis (DSA) remains unchanged from the analysis carried out when the [financial adjustment] programme was approved in May 2022; the external public debt is assessed as being at high risk of over-indebtedness,” said economist Thibault Lamaire in an interview with Lusa, on the sidelines of the IMF and World Bank Annual Meetings, which took place last week in Marrakech.

For this economist from the African department and one of the authors of the report on the Regional Economic Outlook for sub-Saharan Africa, the situation could change when the gas exploration projects come on stream, guaranteeing Mozambique a high volume of tax revenue that can be used to improve the parameters that are analysed in the DSA.

“In prospective terms, the public debt is considered sustainable since a high percentage of the projected future indebtedness reflects the state’s participation in the large liquefied natural gas projects, which will be reinforced directly from future liquefied natural gas revenues, which are expected to be significant,” the economist added.

Last week, the director of the IMF’s African department had said that eight countries needed to restructure their debt, and the Fund later named Sao Tome and Príncipe and Mozambique as being on that list, taking into account the DSA.

For this year, Thibault Lamaire presented a growth forecast of around 6 per cent, “driven by the extractive industries, including Coral South, the first liquefied natural gas project to start production in October 2022, and supported by mining activities”.

The IMF also predicted “the start of production of two onshore liquefied natural gas projects in 2027 and 2029, which will have a positive impact on growth due to the impact of production on tax revenues and the current account.”

Source: Lusa