The Standard & Poor’s (S&P) rating agency has issued a stern warning regarding Mozambique’s capacity to meet its domestic debt obligations, which amount to approximately $1.1 billion over the coming two years. This forecast signals a period of financial strain for the Mozambican government, which is poised to face substantial debt repayments in 2025 and 2026, projected at $620 million and $530 million respectively.
Leon Bezuidenhout, deputy director of S&P’s sovereign ratings department, expressed these concerns in an interview with Bloomberg. Bezuidenhout highlighted that the debt repayments could pose significant challenges, necessitating political concessions to navigate the financial pressures. Despite these concerns, he noted that Mozambique’s local financial system retains the capacity to manage additional debt issuance, albeit amid exceedingly high interest rates.
The current escalation in domestic public debt is attributed to Mozambique’s exclusion from international financial markets, a consequence of the “hidden debts” scandal. This controversy involves over $2 billion in illicit loans acquired by three companies—Proindicus, Ematum (Mozambique Tuna Company), and MAM (Mozambique Asset Management)—from Credit Suisse and Russia’s VTB Bank between 2013 and 2014. These loans, secured through sovereign guarantees issued under the then President Armando Guebuza’s administration, breached budgetary limits set by the 2013 and 2014 budget laws and were approved by the former Finance Minister Manuel Chang without parliamentary oversight.
The scandal’s fallout forced Mozambique to turn to domestic debt as a means to fund public expenditure. Bezuidenhout further attributed the rise in debt to a government initiative aimed at streamlining public administration expenditure, which, paradoxically, exacerbated the situation, prompting cautionary advice from the International Monetary Fund (IMF).
The IMF projects a modest growth rate of approximately 5% for Mozambique’s economy this year. However, with public debt expected to soar to 97.5% of Gross Domestic Product (GDP)—one of the highest ratios in Africa—Mozambique’s fiscal health remains a point of concern.
