World Bank weighs options to ease Mozambique’s mounting debt burden

Mozambique’s debt crisis is worsening, pushing the World Bank to step up efforts to support the Southeast African nation as borrowing costs rise and investor confidence weakens. 

The strain reflects wider pressure across emerging markets, where tighter global financial conditions and geopolitical tensions are making it harder for governments to access affordable funding.

For Mozambique, those challenges are compounded by slow growth and repeated climate shocks that have weighed on public finances. 

The country’s economic outlook now hinges in part on its vast liquefied natural gas (LNG) reserves.

Long seen as a potential driver of growth, the sector has faced delays, leaving authorities with fewer near-term options to ease fiscal pressure. 

Against this backdrop, the World Bank says it is considering “all options” to help Mozambique stabilize its finances, combining concessional funding, policy support and efforts to attract private investment. 

A joint debt review with the International Monetary Fund found the country’s debt is unsustainable, adding urgency to calls for reform and possible restructuring.

Rising pressure on markets 

Fily Sissoko, the World Bank’s regional director for Mozambique, said the government is working closely with partners to address long-standing fiscal gaps, including weak revenue collection and high spending needs.

The bank is preparing about $6 billion in concessional financing over five years, with a further $4 billion expected from private investors. 

Market signals point to growing concern. Mozambique’s bond spreads have climbed above 1,000 basis points over U.S. Treasuries, according to JPMorgan data, a level often linked to distressed debt.

The move reflects both domestic risks and a broader pullback from emerging-market assets. 

Attention has also turned to the country’s $900 million Eurobond after President Daniel Chapo said some form of debt restructuring may be needed.

Talks with creditors are likely to follow as Mozambique seeks a new IMF program after its previous agreement ended in 2025.

Reform plans take shape 

Economists say restoring fiscal discipline will be key. Proposed steps include improving tax collection, cutting inefficiencies in public spending and setting out a three- to five-year plan to bring debt under control. 

Public debt stands at about 91 percent of GDP, with arrears at 1.3 percent by the end of 2025.

Part of the burden stems from liabilities linked to state oil company ENH, along with missed payments to creditors including China, India and Saudi Arabia.

LNG seen as long-term support 

Despite the pressure, LNG remains central to Mozambique’s outlook.

Higher global gas prices, driven in part by Middle East tensions, could lift future revenues.

Officials are also weighing a sovereign wealth fund to manage proceeds.

If projects move ahead as planned, LNG exports could help ease the country’s debt strain over time, though much will depend on steady reforms and a return of investor confidence.