Mozambique faces a severe debt crisis that threatens its economic stability and development prospects.Recent reports paint a grim picture of the country’s financial health, with both internal and external debts reaching alarming levels.By 2026, Mozambique will pay over one billion euros in internal debt alone.

Leon Bezuidenhout, Deputy Director of Foreign Ratings at S-P, described these as “very large maturities” in a Bloomberg interview.The country must pay 38 billion meticais (545 million euros) in 2025 and 34 billion meticais (480 million euros) in 2026.The surge in internal public debt is not an isolated issue.

In 2023, Mozambique’s total debt service payments hit a record high of $2.1 billion, a 70% increase from the previous year.Mozambique’s Debt Crisis: A Nation Burdened by Internal and External Obligations.

(Photo Internet reproduction)The country’s total public debt grew by 4.5% from 2022 to 2023, reaching $15.8 billion, equivalent to 76% of GDP.

This debt crisis stems from multiple factors.The hidden debt scandal of 2016, where large loans were taken without parliamentary approval, led to Mozambique‘s withdrawal from international financial markets.Consequently, the government turned to domestic borrowing to finance public expenditure.Mozambique’s Financial StrainAdditionally, a government program aimed at simplifying public sector spending backfired, leading to increased expenses and IMF warnings.Between December 2023 and May 2024, internal public debt jumped by 51.9 billion meticais, bringing the total close to 370 billion meticais.External debt also poses significant challenges.

Eurobond interest rates have nearly doubled, further straining the country’s finances.The government now pays a 9% interest rate on Eurobonds maturing in 2031, up from 5% previously.

This translates to $81 million annually from 2023 to 2028, rising to $225 million per year between 2028 and 2031.The IMF projects Mozambique’s economy to grow by about 5% this year.

However, public debt is expected to reach a staggering 97.5% of GDP, among the highest in Africa.In addition, under current arrangements, 20% of Mozambique’s fiscal revenue is allocated to servicing debt.S-P analysts assigned Mozambique a CCC rating in April, categorizing it as non-investment grade or ‘junk’.

This rating reflects the country’s precarious financial position and limited options for economic maneuverability.As Mozambique grapples with these financial challenges, balancing debt repayment with essential public spending remains crucial.The government’s ability to manage its debt while fostering sustainable economic growth will be critical in the coming years, as the international community watches closely.