The World Bank warned today of the worsening public debt situation in Mozambique, describing it as “unsustainable,” with overdue payments 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, titled “From fragility to stability – why fiscal reforms cannot wait”, the World Bank notes that public debt is “assessed as being in distress and considered unsustainable.”
The report states that total public debt, including state-guaranteed debt, stabilized at 91.4% of GDP at the end of 2024 but adds:
“The most recent debt sustainability analysis (DSA) by the World Bank and IMF, published in February 2026, classifies Mozambique’s total public debt as ‘in distress’ and ‘unsustainable.’ This represents a deterioration from the previous DSA published in June 2024, mainly due to rising fiscal pressures that have not been adequately addressed.”
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The report highlights that debt is in default “due to overdue debt service, which amounted to 1.3% of GDP in December 2025.”
“Debt is considered unsustainable under current policies, as it will continue to grow rapidly from already very high levels,” the report warns, noting that the government “increased its reliance on central bank financing and failed to repay principal owed to the central bank in 2024 and 2025.”
Mozambique’s central bank financing to the state reached 6% of GDP in December 2025, up from 1.5% in December 2023.
The report also notes that domestic debt issuance “has been dominated by short-term instruments, with an average interest rate of around 12.6%.” While domestic debt accounted for about 29% of total public debt at the end of 2024, it represented roughly 76% of interest payments.
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“Investor appetite for government bonds declined due to increased sovereign risk perception and overdue debt service. In 2025, treasury bonds were mainly issued to refinance maturing instruments,” the World Bank explains.
The report emphasizes that domestic debt remains a key vulnerability due to its short maturity, concentration risks, and the fact that much of it has been issued to finance recurring expenses at interest rates significantly higher than real GDP growth.
“Debt is considered unsustainable under current policies, as it will continue to grow rapidly from already very high levels,” the report from the World Bank warns. Photo: Andrew Caballero-Reynold/AFP
The World Bank stresses that “arrears and defaults in debt service are significant,” poor fiscal management has increased public debt, and “liquidity constraints are worsening, as evidenced by the government’s difficulties in issuing bonds in 2025 and accumulating arrears” with suppliers and creditors.
“Domestic debt rose sharply, with high costs and short maturities, creating repayment pressures already in 2026,” it adds.
The Bank of Mozambique also warned this week, for the second time this year, that public internal debt “continues to worsen,” reaching a stock exceeding €6.57 billion.
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“Public internal debt continues to worsen, constraining the functioning of the financial market,” the central bank stated after the Monetary Policy Committee meeting held Monday in Maputo.
Excluding loan and lease contracts and overdue liabilities, domestic public debt stands at 487.3 billion meticais (€6.573 billion), up 12.3 billion meticais (€166 million) from December 2025.
“Delays in internal public debt payments by the state persist, impacting weak demand for public securities and keeping interbank money market rates rigid,” the CPMO final statement noted, echoing similar warnings issued in its January meeting.
