Mozambique in debt distress

12/8/2016 - Report
ic_blogtagMozambiqueCorporate DebtCountry RiskGrowthOil & Gas

​Mozambique has been one of the fastest growing countries in Africa, with average growth from 2006-16 at 7%. Despite this, an unfolding sovereign debt crisis triggered by undisclosed government debt levels and a series of resource project delays hamper growth prospects for the coming years. EH expects growth to slow to 4.0% in 2016, 1.0% in 2017, and 2.0% in 2018. This implies substantial risk (see chart 1 and 2).


Following the discovery of the world’s largest natural gas reserves in 2011 and the premature expectation of a windfall, the government went on a borrowing spree. Yet much of the receipts have been misspent with the Tuna bond saga being a case in question. Negotiations on exploitation terms between the government and operators have taken longer than expected and subdued commodity price forecasts have decreased project investments. The Rovuma-basin gas mega-projects are not expected to come on stream until late 2018. If there are no further delays, the projects could potentially boost government revenue by an average of USD2bn a year between 2021 and 2025. This means that Mozambique’s government will have to sustain fiscal consolidation and postpone vital capital expenditures until the next decade. 

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