Potential Public Debt Restructuring in Mozambique Prompted by Election Turmoil

Mozambique is considering the restructuring of its public debt after the government faced a loss of around 42 billion meticais ($658 million) in revenue due to post-election unrest, as stated by the new finance minister of the southeastern African country.

“This is a process that is currently underway,” remarked Carla Louveira, who was appointed as the finance chief by President Daniel Chapo just days after his inauguration last week.

Louveira, who previously served as a deputy minister in the former administration, declined to reveal whether the government plans to overhaul both domestic and dollar-denominated debt when contacted by phone.

Protests that erupted following the contentious elections on October 9 have shaken Mozambique, where debt rose to about 96% of the gross domestic product last year. To address significant deficits, the government has resorted to issuing local bonds, causing domestic debt to nearly triple in November compared to figures recorded five years earlier.

Louveira stated that protests in December alone led to a revenue loss of approximately 14 billion meticais for the government, as reported on state-owned TVM. Standard Bank Group predicted that economic growth slowed to 2.5% last year, marking the weakest performance since 2020.

In 2019, Mozambique restructured its sole dollar bond, converting it into $900 million of notes due in 2031. The government had previously defaulted on this debt after acknowledging in 2016 that it had accumulated over $1 billion in debt without the necessary disclosures to the International Monetary Fund.

As one of the world’s poorest countries, Mozambique has been counting on significant natural gas discoveries off its northeastern coast to generate billions in state revenue and revitalize its economy. However, an insurgency associated with the Islamic State has halted these projects for several years.

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