World Bank looks at 'all options' to help debt-burdened Mozambique

By Colleen Goko

JOHANNESBURG, March 18 (Reuters) - The World Bank is working with Mozambique to tackle the country's mounting debt challenges, a senior bank official said, as its borrowing costs surge, highlighting pressure on its finances against a backdrop of heightened geopolitical risk.

The country is struggling to stabilise its economy, burdened by debt, weak growth and the impact of climate shocks. Hopes of a recovery hinge partly on the restart of major liquefied natural gas projects.

Fily Sissoko, World Bank regional director for Mozambique, said a Debt Sustainability Analysis, drafted with the International Monetary Fund and published in February, showed debt was not sustainable.

"The government is very well aware of this and working very closely to see how we can help them address some of these imbalances, looking at all options," he told Reuters.

The bank is already preparing $6 billion in mostly concessional financing over five years, Sissoko said. Another $4 billion in private sector investment could be brought in with the help of World Bank private sector arm, the International Finance Corporation, and loan and investment guarantee platform, the Multilateral Investment Guarantee Agency.

Mozambique's sovereign spread - the premium investors demand to hold its hard-currency debt over U.S. Treasuries - rose above a 1,000 basis-point threshold this week to hit a ten-month high, data from JPMorgan showed.

The surge also reflects a broader retreat from emerging market debt, spurred in part by the Middle East conflict.

MORE PREDICTABILITY FOR PRIVATE INVESTORS

Mozambique's sole international $900 million bond is in the spotlight since President Daniel Chapo said in January some debt restructuring might be necessary, without giving more details.

Chapo emphasised a focus on renegotiating terms with international creditors following an anticipated deal with the IMF. Mozambique’s previous IMF programme ended prematurely in April 2025.

Sissoko said Mozambique could address some long-standing structural issues, such as high fiscal deficits, with improved revenue collection, enhancing fiscal efficiency, and advancing fiscal consolidation.

"What we're looking at is a three-to-five-year plan. And we hope that in the next few months this fiscal consolidation plan and macro fiscal plan will be finalised so that we can really move towards more stability in the market, more predictability for all the private investors."

The debt analysis showed Mozambique had debt servicing arrears on external and domestic debt equivalent to 1.3% of GDP by end-2025, while public debt stood at 91% of GDP, driven by liabilities at state-oil company ENH.

The report flagged missed repayments to multilateral and bilateral creditors, including China, India, and Saudi Arabia.

Sissoko highlighted the potential of Mozambique's LNG projects and also the possibility of setting up a sovereign wealth fund to manage revenues.

"LNG could mean really huge opportunities for Mozambique. The country could be one of the largest LNG producers in the world," he said.

LNG prices have soared since the U.S.-Israeli war on Iran has constrained shipments.