Mozambique Faces Debt Challenges as Natural Gas Revenues Delayed

AFRICAN BUSINESS AND ECONOMYSeptember 13, 2024 at 2:53 PM UTC

TLDR

Mozambique facing rising risks from mounting domestic-currency debt repayments and delayed natural gas windfalls.
Government turned to local debt to cover budget deficits after losing access to international markets in 2016.
Significant challenges ahead as Mozambique must repay 38 billion meticais in 2024 and 34 billion in 2026, with half maturing in November 2026.

Mozambique is grappling with rising risks from looming domestic-currency debt repayments and delayed natural gas windfalls, according to S&P Global Ratings.

The country’s domestic public debt has more than doubled since 2020, as the government turned to local debt to cover persistent budget deficits after losing access to international markets in 2016.

In 2024, Mozambique must repay 38 billion meticais ($601 million) in government bonds, with an additional 34 billion meticais due by 2026, half of which matures in November of that year. S&P’s Leon Bezuidenhout warned that these "chunky maturities" pose significant challenges for the government.

Key Takeaways

Mozambique's debt burden is growing, with total public-sector debt projected to reach 97.5% of GDP in 2024. For every dollar of tax revenue collected, 20 cents is used for debt servicing. Delays in liquefied natural gas (LNG) projects, which were expected to generate revenue to service Mozambique's $900 million bond due in 2028, have further complicated the situation. Inflation has slowed to under 3%, but interest rates on five-year local-currency bonds remain above 19%. Despite these challenges, local banks may still have the capacity to absorb additional government debt issuances due to high real yields.

Mozambique

Debt Crisis

Economy

Interest Rates

Inflation

S&P Global Ratings