Mozambique has moved to ease pressure on its external obligations by fully settling a $701 million debt owed to the International Monetary Fund (IMF), a development that signals a shift in its near-term financial strategy.
The repayment, highlighted in a March 27 research note by Standard Bank’s chief economist in Mozambique, Fáusio Mussá, was based on information sourced from the IMF. Although neither the Mozambican government nor the IMF has formally announced the transaction, data on the IMF’s official portal indicates that the country’s outstanding balance has dropped to zero.
This development has also led to a change in engagement plans with the Fund. The settlement reportedly prompted Mozambique to cancel an IMF mission that had been scheduled for August, suggesting a pause in formal programme discussions or reviews.
Prior to the repayment, Mozambique’s debt position had raised alarm among international financial institutions. In February, the IMF cautioned that the country’s debt was distressed and following an unsustainable trajectory, reflecting mounting fiscal pressures and vulnerabilities in its public finances.
Concerns have also extended beyond the IMF. The World Bank warned in March that Mozambique’s current economic path could jeopardise up to $50 billion in planned gas developments—projects widely seen as critical to the country’s long-term growth prospects and revenue generation.
Despite these challenges, Mozambique entered the repayment period with relatively strong external buffers. Foreign exchange reserves stood at about $4.15 billion at the end of January, close to record levels, providing some capacity to absorb the financial impact of the settlement.
However, analysts expect those reserves to decline in the short term. Standard Bank estimates they could fall to around $3.5 billion after the IMF repayment, even as the country continues to accumulate arrears with other bilateral and multilateral creditors—highlighting that broader debt sustainability risks remain unresolved.
By: Andrews Kwesi Yeboah