June 23 2016 Antonio Pilogallo
Financial Services

Public debt in Mozambique

Public debt in Mozambique: Consequences and perspectives

During the last months, Mozambique has been facing a complicated situation from an economic and financial point of view, which granted a big international media exposure to the country, as well as consequences to the public and private sector.

At the center of the storm are loans contracted by three state companies:

  • Ematum: USD 850 million debt contracted in 2013 for purchasing of 24 fishing boats and six military speedboats for maritime protection,
  • Proindicus: USD 622 million loan to provide security for oil and gas operations in the Rovuma Basin, and more generally for shipping in the Mozambique Channel,
  • Mozambique Asset Management: USD 535 million loan for the company established to provide maritime repairs and maintenance.

This debt has been contracted during the government of the former president, Armando Guebuza. With the exception of the Ematum’s, the existence of those large amount of borrowing had not previously been disclosed to the International Monetary Fund until March 2016, despite a previous agreement with the Mozambican government that required to report any debt-related transactions to ensure full accountability of the government to its citizens and Parliament.[1]

These three loans between them amount to over 20 per cent of the country’s total foreign debt of USD 9.89 billion, and around 17 per cent of the total public debt of USD 11.64 billion. The discovery of this debt resulted into multiple consequences[2]:

Public debt


IMF has stopped the disbursement of a USD 55 million loan and had suspended lending, as the country had violated the terms of the USD 283 million rescue loan agreement made in December 2015.[3] PUBLIC AID

The World Bank not only interrupted direct financial aid to Mozambique, intended for funding individual investment projects, but also held back payments of approximately $40 million for direct budgetary support. Hereafter all the 14 top budget donors, including Sweden, the European Union, the United Kingdom and the African Development Bank, suspended their budget support for a total amount of USD 467 million for 2016, which is 12 per cent of all public expenditure. [4]


Despite the suspension will not affect the full 12 per cent, since some donors had already begun disbursing aid for 2016 before the scandal came out, the Minister of Finance Adriano Maleiane said the government is making cuts in public expenditure including restrictions on the use of fuel, reduction in travel by government delegations and the suspension on hiring new staff for the state. However, he pledged that education and health will be the last to be affected.[5]


Before the loans were disclosed, Mozambique’s debt risk profile was considered moderate by the IMF. The newly disclosed debt is expected to shift the country’s debt risk to high.

On April 2016, Fitch Ratings has downgraded Mozambique from B to CCC, since the debt to GDP ratio is already 83% and with expected continued devaluation. [6]On March 2016, Standard & Poor had also downgraded Mozambique sovereign rating to CC.[7]


On a recent conference held in Maputo, the chairman of ENH, the state owned Hydrocarbons Company, Omar Mithà stated that the flagship LNG export project will not be affected by the debt crisis, since the Rovuma Basin O&G investments are regarded as projects on their own, with their own financial basis and legal framework.[8]

However, there are other sectors where companies owned by the state play an important role, as energy and infrastructures that could be partially affected by the debt situation.


The Government is willing to give the companies that benefited from government guarantees their responsibilities. Business plans from the three companies have been solicited, so that it can be assessed their ability to pay. On one hand, Maleiane didn’t even reject the possibility of selling off the companies’ assets to help pay the debt. On the other hand, the ability to pay will depend entirely on whether oil and gas companies (such as the American Anadarko, or the Italian ENI) or shipping companies operating in Mozambican waters, are willing to pay for their services.

On a recent press conference held in Maputo, President Filipe Nyusi compared Mozambique as a house where malaria has been just detected and donors as parents that won’t let their child enter because of the presence of mosquitos. He confirmed how the Government will work together with the financial institution in order to disinfect the house and return to a normal life.[9]

Antonio Pilogallo, Associate at Infomineo. Know more about Antonio.


[1] Press: Club of Mozambique, AIM: http://clubofmozambique.com/news/mozambican-public-debt-now-us11-64-billion-pm/

[2] Press: Club of Mozambique, AIM: http://clubofmozambique.com/news/mozambiques-finance-minister-warns-of-immediate-public-expenditure-cuts/?platform=hootsuite

[3] Press, Wall Street Journal: http://www.wsj.com/articles/imf-cancels-mozambique-credit-meeting-following-wsj-report-1460733681

[4] Press, Wall Street Journal: http://www.wsj.com/articles/world-bank-is-suspending-direct-financial-aid-to-mozambique-1461775025

[5] Press, AllAfrica: http://allafrica.com/stories/201605060667.html

[6] Ficht Ratings: https://www.fitchratings.com/site/fitch-home/pressrelease?id=1003700

[7] Press, Bloomerang: http://www.bloomberg.com/news/articles/2016-03-15/mozambique-s-rating-cut-by-s-p-to-cc-on-tuna-bond-restructuring

[8] Press, Interfax: http://interfaxenergy.com/gasdaily/article/20137/moz-debt-crisis-will-not-affect-lng-finance-enh

[9] Press, Club of Mozambique, LUSA: http://clubofmozambique.com/news/disinfecting-the-house-banishing-the-mosquitoes-nyusi-compares-hidden-debts-to-malaria/

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