Mozambique said it would negotiate for further debt relief to ease fiscal pressures after announcing that China had agreed to adjust repayment arrangements for some of its debt.
Reuters reported that Mozambique’s Ministry of Finance said in a statement on Wednesday (28 October): “Mozambique is prioritising negotiated solutions to improve debt repayment arrangements and ease pressure on government finances, while avoiding a comprehensive debt restructuring as far as possible.”
The statement said Mozambique planned to hold talks with bilateral creditors to explore mechanisms for converting debt into investment. The country also needs an additional US$528 million (S$677 million) in external financing to complement an International Monetary Fund (IMF) support programme it hopes to secure.
Mozambique announced on Monday (26 October) that China had agreed to let it adjust its “repayment schedule”, but did not disclose the amount of debt covered by the agreement.
Official figures show that Mozambique owed China about US$1.28 billion as of the end of June, accounting for nearly 15% of its total external debt. China is Mozambique’s largest bilateral creditor.
Resource-rich Mozambique has long struggled with a heavy debt burden. An analysis by the World Bank and the IMF found that its debt was unsustainable.
Mozambique’s debt woes can be traced to a hidden debt scandal that erupted in 2016. The scandal severely damaged investor confidence and limited the country’s access to financing. Delays to several major natural gas projects, which had been expected to drive export and revenue growth and improve the government’s fiscal position, have compounded its difficulties.
Tradeweb data showed that bid prices for Mozambique’s international bonds rose 0.3 US cents to 91.614 US cents on the dollar.
