Mozambique Faces Fiscal Challenges Amid Rising Debt Concerns

The International Monetary Fund has urged Mozambique to adopt fiscal consolidation measures to tackle rising debt and limited external financing. The fiscal deficit has slightly improved but is threatened by increasing interest payments. Mozambique must manage its debt effectively, with a focus on wage spending containment and expanding the tax base.

The International Monetary Fund (IMF) has issued a stark warning to Mozambique, highlighting the urgent need for ambitious fiscal reforms to address mounting debt issues and limited external funding options. The IMF's assessment follows its annual review of the nation's fiscal landscape.

In recent years, Mozambique has managed to reduce its fiscal deficit from 6.2% of GDP in 2024 to 4.5% last year, primarily by curbing spending on goods, services, and capital projects. However, rising interest payments threaten to reverse this progress.

The IMF's report underscores the critical importance of broadening the tax base, enhancing debt management, and reducing wage spending to restore financial stability. The Fund also noted the pressure on Mozambique's sole international dollar bond amid talks of debt renegotiation with international partners.

(With inputs from agencies.)