The International Monetary Fund (IMF) warned on Tuesday, February 17, that Mozambique faces “increasingly difficult financing conditions,” a scenario that will have forced cuts in spending on goods, services, and capital projects in 2025, a year in which the economy is expected to have grown by only 0.5%.
According to the Lusa news agency, in the conclusions of the Article IV consultation, approved by the institution’s executive board, the IMF states that the “government faces increasingly difficult financing conditions,” pointing to delays in debt servicing and stagnation in the holding of government securities by national banks, the main source of financing for persistent budget deficits.
According to the report, net external financing has been negative, leading to an estimated reduction in the budget deficit to 4.5% of Gross Domestic Product (GDP) in 2025, compared to 6.2% in 2024. This decrease is mainly the result of public spending restraint. Nevertheless, the country “continues to face a complex macroeconomic environment, marked by moderate growth, fiscal and debt vulnerabilities, and declining foreign aid.”
After growth of 5.4% in 2023 and 2.1% in 2024, the IMF estimates that GDP will have grown by only 0.5% in 2025. The institution notes that “economic activity has been gradually recovering after the sharp contraction at the end of 2024,” associated with the post-election unrest that followed the October elections that year.
While acknowledging “some positive developments,” such as low inflation, adequate foreign exchange reserves, the resumption of TotalEnergies’ natural gas megaproject, and Mozambique’s removal from the Financial Action Task Force (FATF) gray list, the IMF considers that “challenges remain significant.”
The institution warns that large budget deficits and the need for greater exchange rate flexibility could “exacerbate macroeconomic and debt vulnerabilities.” It also predicts that total deficits will increase due to rising interest charges, while growth outside the mining sector is expected to remain modest, at around 2%, reflecting weak credit growth.
IMF directors stress “the urgency of a comprehensive reform package” to restore macroeconomic stability and ensure sustainable growth, advocating credible fiscal consolidation, wage restraint, broadening the tax base, better management of public finances and debt, and greater transparency, while protecting the most vulnerable groups.
