Mozambique IMF Lifeline: Why It Needs Help

Mozambique is looking for another IMF support program after its earlier one was terminated. Despite the program ending early, the country still has many debt and financing issues. The conclusion of the IMF team, which visited Mozambique up until September 18, showed that additional reforms should be conducted before launching a new IMF program.

Unsustainability of Mozambique’s public debt and its distressed debt position were determined by the IMF. According to the latest projections of the Fund, public sector debt of the country will equal 94.6% of GDP in 2026.

Why does Mozambique need a new IMF programme?

Mozambique’s previous IMF programme was cut short in April 2025. The hope now is that the current mission from the IMF will facilitate discussions for the country to start a new IMF programme. Another mission will follow in November to discuss the program conditions and targets.

The IMF stated that there are positive signs of economic activity recovering and inflation remaining low, but the country still faces large fiscal and external imbalances. They noted that further reforms were needed for debt sustainability and growth.

How did the debt crisis occur?

One of the major changes occurred with the Mozambique hidden-debt scandal of 2016, whereby secret borrowings by companies associated with the government led to a loss of investor confidence and to the eventual withdrawal of international budget support.

Although debt restructuring measures have followed, the problem of debts persists in the country. According to the IMF debt analysis, the total amount of public debt in Mozambique stood at 91% of GDP at the end of 2024, with debt service arrears resulting from financing constraints.

The IMF also noted that domestic financing had become an increasingly important source of government finances.

Why are LNG Projects so Significant?

There are significant natural gas reserves in Mozambique that are supposed to make money for the country and government from the exports. However, delays with launching big LNG projects affected the anticipated inflows of foreign money and fiscal revenues.

IMF specifically highlighted further delays in reviving of the LNG projects as risks to Mozambique’s debt outlook.

Thus, there is a tricky situation for the government: it has to invest and spend money on supporting the economy but it should decrease the budget deficit at the same time.

Does Mozambique Pay Back its Debt to IMF?

Yes. Mozambique repaid its debt to IMF back in the beginning of 2026. According to Reuters, this repayment was seen by the experts as the possible step that could help the country gain support from IMF again.

However, this move did not solve the debt problem of the country. IMF still sees the significant fiscal and external imbalances while according to the debt analysis comprehensive reforms are needed.

What Would a New IMF Deal Involve?

As indicated by the September IMF mission, the talks regarding the reforms that would be required under a Fund-supported program will continue over the next few months. The focus areas in these negotiations will involve restoring debt sustainability, fixing external imbalances, fiscal consolidation, and creating an environment for promoting economic growth.

Hence, the challenge for Mozambique is to obtain external aid while undertaking reforms which might limit its ability to spend during the initial stages.

Conclusion

The efforts to secure a new IMF program come at a time when the country is trying to restore its financial stability in the wake of years of debts, the hidden-debts scandal and delayed LNG revenues. With the government clearing all its past debt obligations to the IMF, the overall debt is still considered as unsustainable in nature.