MAPUTO, Feb 18 – The International Monetary Fund has called on Mozambique to implement stronger fiscal consolidation measures as rising debt obligations and tightening financing conditions place increasing strain on the country’s economic outlook.
In its latest annual review, the IMF warned that while Mozambique’s fiscal deficit narrowed to 4.5% of GDP in 2025, down from 6.2% the previous year, escalating interest payments and limited access to external financing could reverse recent progress and worsen debt sustainability.
The Fund noted that domestic banks, which have been the primary buyers of government debt, are approaching their capacity limits, while net external financing has turned negative. This combination has significantly constrained the government’s ability to secure new funding without increasing financial risks.
President Daniel Chapo has also signaled the possibility of renegotiating debt with international creditors, raising investor concerns and adding pressure on Mozambique’s sovereign bond performance.
The IMF emphasized the urgent need for credible fiscal reforms, including stricter control of public sector wages, broader tax collection efforts, and improved debt management practices. These measures are seen as essential to stabilizing public finances and restoring investor confidence.
Monetary policy constraints further complicate the outlook. The Bank of Mozambique has limited room to ease interest rates as it balances inflation control with foreign exchange shortages. The IMF also recommended greater exchange rate flexibility to help improve external competitiveness and support economic adjustment.
Despite the fiscal challenges, Mozambique’s long-term outlook remains tied to its energy sector potential. The anticipated resumption of large-scale liquefied natural gas projects could provide a significant boost to economic growth and fiscal revenues, strengthening the country’s external position over time.
However, the IMF cautioned that substantial risks remain, including elevated public debt, vulnerability to natural disasters, institutional fragility, and ongoing security concerns.
The Fund concluded that decisive fiscal consolidation, combined with structural reforms and improved financial management, will be critical to ensuring Mozambique’s long-term macroeconomic stability and restoring sustainable growth.
