Mozambique: World Bank flags ‘unsustainable’ public debt

The World Bank today warned of a worsening of Mozambique’s public debt, deemed “unsustainable” and with arrears amounting to 1.3% of GDP at the end of 2025, according to a report on the Mozambican economy. In the Mozambique Economic Update report, released today under the title “From Fragility to Stability – Why Fiscal Reforms Cannot Wait”, the World Bank states that “Public debt is assessed as being in distress and deemed unsustainable”. It notes that total public and publicly guaranteed debt stabilised at 91.4% of GDP at the end of 2024, but adds: “The recent World Bank–IMF Debt Sustainability Analysis, published in February 2026, classifies Mozambique’s overall public debt as ‘in debt distress’ and ‘unsustainable’.

This marks a deterioration from the previous DSA, published in June 2024, largely because of growing fiscal pressures that have not been adequately addressed.” It further states that public debt is in distress “due to debt service arrears, amounting to 1.3% of GDP as of December 2025”. “Debt is deemed to be unsustainable under current policies, since debt will continue to grow rapidly from already very high levels,” the report warns, adding that the Government “has increased its reliance on central bank financing and failed to repay principal owed to the central bank in 2024 and 2025”. Financing from the Bank of Mozambique to the State, according to the report, reached “6% of GDP in December 2025, up from 1.5% in December 2023”.

The report also notes that the issuance of domestic debt “has been dominated by short-term instruments, with an average interest rate of around 12.6%”. Although it represented about 29% of total public debt at the end of 2024, domestic debt accounted for around 76% of interest payments, the document adds. “Domestic investors’ appetite for Treasury bonds has declined due to increased perception of sovereign risk and delays in debt servicing.

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In 2025, Treasury bonds were issued mainly to refinance maturing securities,” the World Bank explains. It also highlights the growing risk of domestic debt, which “remains a central vulnerability, given its short maturity, concentration risks, and the fact that a large share of this debt was issued to finance recurrent expenditure at interest rates significantly above real GDP growth”. The World Bank insists that “arrears and defaults in debt servicing are significant”, that weak fiscal management has led to rising public debt, and that “liquidity constraints are worsening, as evidenced by the Government’s difficulties in issuing bonds in 2025 and the accumulation of arrears” to suppliers and creditors.

“Domestic debt has increased sharply, with high costs and short maturities, creating repayment pressures as early as 2026,” it adds. The Bank of Mozambique also warned again this week, for the second time this year, that domestic public debt “continues to worsen”, having risen to a stock exceeding €6,570 million.

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