Faced with worsening public debt, which reached 74.2% of Gross Domestic Product (GDP) in 2024, the Mozambican government intends to establish a legal limit on debt contracting, as part of the measures included in the government’s new Five-Year Programme (PQG), to be discussed in the coming weeks in Parliament.
The document outlines a macroeconomic stability plan with a horizon until 2029, aimed at ensuring a stable and sustainable financial environment, with a special focus on financial inclusion, stimulating domestic savings and promoting investment.
The proposed structural measures include restructuring public debt under more favourable conditions, broadening the tax base, renegotiating natural resource concession contracts and introducing legal limits on state indebtedness. The proposal comes in the context of growing pressure on domestic debt, which has worsened in recent months, according to recent warnings from the Bank of Mozambique.
The plan also provides for the implementation of strict measures to supervise the financial sector, with the aim of strengthening transparency, institutional responsibility and efficiency in tax collection, as well as combating evasion and rationalising public spending.
Another front of action will be to consolidate the reform of public finance management, with incentives for savings and long-term investment, and to strengthen the population’s financial education.
The PQG 2025-2029, the first under the leadership of President Daniel Chapo, who took office in January, sets the goal of reducing the public debt ratio to 60.8 per cent of GDP by the end of the five-year period.
At the same time, an increase in state revenues from 24.6 per cent to 25.4 per cent of GDP is projected, accompanied by a containment of public spending, which should fall from the current 35.4 per cent to 32.88 per cent.
However, the current scenario is challenging. The Bank of Mozambique warned this week that domestic debt continues to grow, having increased by 11.6 billion meticals (169 million dollars) in the last two months.
At the end of December, the ‘stock’ of domestic debt – excluding loan contracts, leases and outstanding liabilities – totalled 447.2 billion meticals (6.5 billion dollars), representing an increase of 31.7 billion meticals (463 million dollars) over 2024.
These figures were released after the most recent meeting of the Monetary Policy Committee (CPMO), where concern was reiterated about the pace of domestic indebtedness. The situation is aggravated by the decision of financial rating agency Standard & Poor’s, which downgraded Mozambique’s domestic debt to Partial Default, due to late payments and contractual changes in debt securities.
‘This means that we are left with an almost speculative debt instrument. If it’s speculative, few investors will want it in their portfolio,’ warned the governor of the Bank of Mozambique, Rogério Zandamela, emphasising the growing risks of a loss of confidence in the market.
According to the governor, this situation could restrict access to external credit not only for the state, but also for companies and families, raising serious doubts about the sustainability of the country’s current financial trajectory.
Source: Lusa
