Maputo, March 25, 2026 (Lusa) - According to a report on the Mozambican economy, the World Bank warned on Wednesday of the worsening public debt in the country, deemed “unsustainable”, with arrears worth 1.3% of GDP (Gross Domestic Product) at the end of 2025.
The World Bank said in the Mozambique Economic Update report, titled "From Fragility to Stability – Why Fiscal Reforms Cannot Wait” that "public debt is assessed as being in distress and is considered unsustainable”.
The total state-guaranteed public debt appeared to stabilise at 91.4% of GDP at the end of 2024, but notes: "The latest Debt Sustainability Analysis (DSA) by the World Bank and the International Monetary Fund, published in February 2026, classifies Mozambique’s global public debt as 'in distress' and 'unsustainable'. This represents a deterioration compared to the previous DSA, published in June 2024, mainly due to mounting fiscal pressures that have not been adequately addressed".
The public debt is in default "due to arrears on debt servicing, which stood at 1.3% of GDP in December 2025", it adds.
"The debt is considered unsustainable under current policies, as it will continue to grow rapidly from very high levels”, the report warns, saying that the government “has increased its reliance on central bank financing and failed to repay the capital owed to the central bank in 2024 and 2025".
According to the report, the central bank’s financing to the state reached “6% of GDP in December 2025, up from 1.5% recorded in December 2023”.
The document further highlights that the domestic debt issuance “has been dominated by short-term instruments, with an average interest rate of around 12.6%”. Although it represented around 29% of total public debt at the end of 2024, domestic debt accounted for around 76% of interest payments.
"Domestic investors’ appetite for Treasury bonds has declined due to increased perceptions of sovereign risk and delays in debt servicing. In 2025, Treasury bonds were issued primarily to refinance maturing securities", said the World Bank.
It also notes that the growing risk posed by domestic debt, “remains a key vulnerability, given its short maturity, concentration risks and the fact that much of this debt was issued to finance recurrent expenditure at interest rates significantly higher than real GDP growth”.
The World Bank emphasises that "arrears and defaults on debt servicing are significant", that weak fiscal management has increased public debt, that "liquidity constraints are worsening, as shown by the government's difficulties in issuing bonds in 2025 and the accumulation of arrears" to suppliers and creditors.
"Domestic debt has risen sharply, with high costs and short maturities, creating repayment pressures as early as 2026", it says.
The central bank issued a warning this week, for the second time this year, that domestic public debt “continues to worsen”, having grown so far to over €6.57 billion.
The central bank said in a statement following the meeting of its Monetary Policy Committee (CPMO), held on Monday in Maputo, that "domestic public debt continues to worsen, limiting the functioning of the financial market".
The report further says that domestic public debt, excluding loan, lease agreements and overdue liabilities, stands at 487.3 billion meticais (€6.573 billion), an increase of 12.3 billion meticais (€166 million) compared with December 2025.
The CPMO’s final statement says that "delays in the payment of internal public debt by the government persist, impacting the weak appetite for government bonds and the rigidity of interest rates in the interbank money market", having already issued similar warnings at the previous meeting in January.
PVJ/MYAL // AYLS
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