The International Monetary Fund (IMF) has called on Mozambique to implement comprehensive fiscal and structural reforms to stabilise its economy, warning that large deficits, weak growth and mounting debt pose serious risks to long‑term stability.
The appeal came on Wednesday as the IMF executive board concluded its 2025 Article IV consultation with Mozambique.
They noted that despite low inflation, adequate foreign currency reserves and the resumption of the TotalEnergies-led liquefied natural gas project, the country remained burdened by fiscal and debt vulnerabilities.
“Directors stressed substantial downside risks and vulnerabilities stemming from large internal and external imbalances, weak growth, high public debt, security challenges, institutional fragilities and climate shocks,” the Bretton Woods institution said in a statement.
“They underscored the urgency of formulating a comprehensive policy reform package to entrench macroeconomic stability and lay the foundation for stronger and more durable growth.”
Mozambique’s economy has struggled to recover from a sharp contraction in late 2024, following elections and years of subdued growth.
Non‑mining sectors continue to expand at only around two percent annually, reflecting weak credit growth and limited private investment.
Meanwhile, persistent fiscal deficits – financed largely through domestic banks – have strained the financial system while external financing has turned negative.
The IMF warned that rising interest payments would widen overall deficits in the coming years, even as primary fiscal balances remain modest.
It urged authorities to rein in the wage bill, broaden the tax base, strengthen public financial management and address risks from state‑owned enterprises and the pension system.
Mozambique’s debt crisis stems from years of heavy borrowing, compounded by declining foreign aid, frequent natural disasters and governance challenges.
Debt service delays have already limited the government’s access to financing, forcing cuts in spending on goods, services and capital projects.
The IMF welcomed Mozambique’s removal from the Financial Action Task Force (FATF) grey list and the establishment of a Sovereign Wealth Fund but stressed that ambitious reforms are essential to restore debt sustainability and build public trust.
While the LNG sector offers significant medium‑term potential, with production expected to begin in 2030, the IMF cautioned that until then the country is likely to face large current account deficits driven by LNG‑related imports and external debt obligations.
JN/APA