Mozambique's Debt Crisis: A Threat to Economic Stability
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Loading... - Kofi Eshun
- 13 Sep 2024
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Mozambique is facing a severe debt crisis that poses a significant threat to its economic stability and development prospects. The country's internal and external debts have reached alarming levels, with both short-term and long-term implications for its financial health.
Mozambique's internal debt is expected to reach staggering levels in the coming years. By 2026, the country will pay over one billion euros in internal debt alone, with large maturities of 38 billion meticais (545 million euros) in 2025 and 34 billion meticais (480 million euros) in 2026. This surge in internal public debt is attributed to the government's reliance on domestic borrowing to finance public expenditure, following the hidden debt scandal of 2016.
External debt also poses significant challenges for Mozambique. The country's total public debt grew by 4.5% from 2022 to 2023, reaching $15.8 billion, equivalent to 76% of GDP. The interest rates on Eurobonds 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, translating to $81 million annually from 2023 to 2028, rising to $225 million per year between 2028 and 2031.
The debt crisis has severe consequences for Mozambique's economy. The IMF projects the country's economy to grow by about 5% this year, but public debt is expected to reach a staggering 97.5% of GDP, among the highest in Africa. Furthermore, 20% of Mozambique's fiscal revenue is allocated to servicing debt, limiting the government's ability to invest in essential public services and infrastructure.
S&P analysts have assigned Mozambique a CCC rating, categorizing it as non-investment grade or 'junk'. This rating reflects the country's precarious financial position and limited options for economic maneuverability.
