- IMF and Mozambique Advance Programme Talks as Debt Sustainability Remains Key Hurdle
Mozambique and the International Monetary Fund have advanced discussions on reforms that could underpin a new Fund-supported programme, but restoring debt sustainability and addressing persistent fiscal and external imbalances remain central conditions for moving towards a formal agreement.
An IMF mission led by Pablo Lopez-Murphy concluded a September 9-18 visit to Maputo after reviewing recent economic developments and holding discussions with the authorities on a possible financing arrangement.
The mission stopped short of reaching a staff-level agreement, with the Fund saying negotiations over the reforms required to support a programme would continue in the coming months.
Mozambique’s Finance Ministry has expressed optimism that the discussions could ultimately lead to a new IMF-backed programme, while Reuters reported that a further mission could take place as early as November.
The latest talks mark another stage in Mozambique’s attempt to rebuild its formal financing relationship with the IMF following the expiry of its previous Extended Credit Facility in April 2025 with two programme reviews outstanding.
The government subsequently requested a successor arrangement, but the IMF has repeatedly stressed that progress would depend on reforms capable of addressing domestic and external imbalances.
The IMF said activity was subdued but beginning to show signs of recovery, while inflation remained contained. Fiscal consolidation that began in 2025 has continued, largely through expenditure restraint as the government operates under tight financing conditions.
But the Fund warned that Mozambique still faces significant fiscal and external imbalances, adverse climate shocks and energy-related disruptions, requiring further policy action before stronger and more resilient growth can be secured.
The IMF and World Bank have assessed Mozambique’s overall public debt as being in debt distress and on an unsustainable path, while public external debt remains at high risk of distress. Financing pressures have intensified as domestic banks have become increasingly cautious about adding government securities to their balance sheets amid concerns over debt-service delays.
Debt-service arrears also persisted during 2025, extending into short-term government securities, according to the IMF’s latest Article IV assessment.
Those pressures mean a future IMF programme will likely have to balance fiscal consolidation with measures aimed at rebuilding market confidence, improving public financial management and creating enough fiscal space to protect essential spending.
The June IMF mission had already identified priorities including further improvements in the fiscal position, stronger monetary and exchange-rate frameworks, preservation of financial stability, better governance and private-sector-led growth.
The Fund has previously argued that persistent FX pressures are limiting imports and weighing on economic activity, while recommending greater exchange-rate flexibility alongside fiscal consolidation and measures to strengthen the monetary framework.
The government needs to reduce fiscal and debt vulnerabilities without imposing adjustment severe enough to undermine a still-fragile economic recovery. It must simultaneously address FX shortages, improve governance and create conditions for private investment while protecting vulnerable households from the effects of consolidation.
The country’s significant natural-gas resources provide a potentially transformative medium-term opportunity but do not resolve the immediate financing problem.
Mozambique hosts some of Africa’s largest natural-gas projects, and the IMF has repeatedly highlighted LNG development as a major source of future growth and foreign-exchange earnings.
Projects including Eni’s Coral developments and TotalEnergies’ Mozambique LNG project could materially alter the country’s external and fiscal position once production and exports expand. The IMF noted earlier this year that TotalEnergies had lifted force majeure on its major LNG development in October 2025, while further gas investments were moving ahead.
But the Fund’s analysis has also made clear that anticipated gas revenues cannot substitute for reforms required now.
Further delays to major LNG projects would weaken the debt outlook, while depending excessively on future resource revenues could postpone difficult decisions on spending, taxation, debt management and foreign-exchange policy.
That creates a striking contrast at the centre of Mozambique’s economic outlook: a country with potentially enormous hydrocarbon wealth remains constrained by debt distress, limited fiscal space and tight access to financing.
IMF analysis has highlighted Mozambique’s weak growth performance since the mid-2010s, limited job creation, declining manufacturing contribution, low agricultural productivity, infrastructure gaps and a financial system in which heavy government borrowing has crowded out private-sector credit.
A new Fund-supported programme would therefore need to do more than provide external financing.
Its credibility will depend on whether reforms can restore fiscal and debt sustainability while creating conditions for more diversified, employment-intensive growth before large-scale gas revenues become available.
The September mission provides no guarantee that an agreement will follow quickly. IMF staff have said only that discussions will continue, and any eventual arrangement would require agreement on policies before being presented to IMF management and, subsequently, the Executive Board.
For Mozambique, that leaves debt sustainability as the critical hurdle between exploratory discussions and a new financing programme.
The country’s natural-gas reserves offer substantial long-term potential, but its immediate challenge is more basic: establishing a fiscal, debt and foreign-exchange framework strong enough to restore confidence, stabilise public finances and convince the IMF that another programme can be implemented successfully.
How quickly Maputo can make that transition will determine whether the current talks become another extended reform discussion or the foundation for Mozambique’s return to sustained IMF financial support.
