The public debt stock dropped to 91% of Gross Domestic Product (GDP) in 2024 due to out-of-court settlements related to the controversial hidden debts case, according to the international rating agency Fitch.
Fitch, known for assessing the ability of countries and institutions to meet their debt obligations, states in its latest analysis that despite the reduction, it expects the public debt burden to increase slightly and stabilize around 92% of GDP by 2026 and 2027. In 2023, debt had reached 97.7% of GDP.
The agency maintains Mozambique’s credit rating at CCC, the last level before financial default, and justifies the forecasted increase in debt with the growing fiscal deficits and liabilities of the National Hydrocarbons Company (ENH), linked to the Area 1 natural gas project, which are only partially offset by nominal GDP growth.
The International Monetary Fund (IMF) estimated that Mozambique’s new agreements with banks to resolve the hidden debts case will cost the equivalent of 1% of GDP in 2024. The hidden debts refer to loans contracted between 2013 and 2014, approved without Parliament’s knowledge by former Finance Minister Manuel Chang, who is currently detained and convicted in the United States.
The Government recently announced a new out-of-court agreement with three banks, including Portugal’s BCP, which reduced the State’s exposure from about 88 billion meticais (220 million USD) to 13.9 billion meticais (220 million USD), an 84% cut in the claimed amount. Since the hidden debts scandal became public in 2016, it has continued to exert significant pressure on the country’s public finances, affecting its international reputation and access to external financing.
Additionally, the British Court of Appeal authorized Privinvest—a company linked to the case—to appeal the decision that ordered it to compensate Mozambique with approximately 6.6 billion meticais (104 billion USD), thus keeping the legal dispute open.
Source: Lusa
