PREVIEW
The Fund’s return to Maputo offers the government a chance to rebuild external credibility, but negotiations will test its willingness to impose fiscal discipline
President Daniel Chapo is hoping that talks on a deal to convert and restructure US$1.4 billion of Chinese debt into yuan, based on a similar agreement in April with Brazil, will pave the way for a new borrowing programme with the IMF.
The deal with Brazil restructured $143 million in debt and will see Mozambique repay via a series of tranches carrying a 3.25% interest rate. That came weeks after Maputo paid $630m to the IMF, clearing its outstanding debts to the Fund ahead of a 2029 deadline. In January, Chapo said that his government would not attempt to restructure its debt burden until it had agreed a new loan facility with the Fund.
Earlier this year, the government hired consulting firm Alvarez & Marsal to advise on managing its public debt. IMF officials have promised a staff visit to Maputo this year but a proposed June date has slipped, and the IMF has warned of high default risks.
A delay in sealing a new IMF deal, beyond the end of 2026 would further stretch public finances (Dispatches 23/2/26, Fund dashes Chapo’s hope of a pain-free loan). The government may be forced to draw on its gas revenues, which it was meant to be paying into the sovereign wealth fund for development projects.
In a paper published last week, Mozambique’s central bank stated that ‘sovereign risk continued at a severe level,’ throughout the last year, and is set to continue because of ‘pressure on domestic public borrowing.’
The document identifies public debt as one of the main vulnerabilities of the national financial system, particularly the use of short-term Treasury Bonds and Treasury Bills to finance the state’s cash flow needs.
That problem, which predates Chapo’s election at contested polls marred by violence and claims of rigging by the governing Frente de Libertação de Moçambique, has driven a chronic liquidity crisis (AC Vol 66 No 2, Facing the costs of Nyusi’s inheritance).
The government is also in dispute with France’s TotalEnergies over the oil company's claims for extra costs of its $20bn gas export plant in Cabo Delgado after it declared force majeure, then stopped working in 2021 due to the jihadist insurgency in the region. Total claims the shutdown cost it $4.5bn in incremental expenses but Mozambique officials insist the figure is less than half that. Work restarted at Cabo Delgado at the start of this year and it is one of Total’s biggest projects in Africa.
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