The International Monetary Fund (IMF) has signaled its readiness to begin formal negotiations with Mozambique for a new financial support program in the coming months, as the Southern African nation struggles to stabilize its “unsustainable” public debt and avoid a deepening liquidity crisis.
In a briefing last week, government spokesperson Inocêncio Impissa denied rumors that the Fund had rejected a new deal, stating that there is “no indication of any express refusal.” Instead, the IMF remains open to discussions that could lead to a new Extended Credit Facility (ECF) including direct budget support, following the expiration of the previous $468 million agreement in April 2025.
The push for a new deal comes as Mozambique faces increasingly “strained” finances. In February, the IMF’s Executive Board concluded that the country’s debt is currently unsustainable, citing several critical factors.
- In March 2025, credit agencies like S&P placed Mozambique’s local currency debt in “selective default” following delays in payments to domestic creditors.
- Public debt is projected to hit 76.9% of GDP this year, with interest payments alone expected to consume 7.4% of the national budget.
- Domestic banks, which have traditionally funded the government’s deficits, have reached their limit, and net external financing has turned negative.
While the Fund is open to talks, it has made clear that any new money will be tied to “ambitious and credible” fiscal consolidation. The IMF is specifically targeting a reduction in the public sector wage bill—a persistent source of fiscal risk—and is pushing for greater exchange rate flexibility to address a chronic shortage of foreign currency.
“The window for action is narrowing rapidly,” the World Bank warned in its March 2026 update, echoing the IMF’s call for immediate structural reforms.
The Mozambican government is banking on the long-term potential of its Liquefied Natural Gas (LNG) projects to restore solvency. Although major production is not expected until at least 2030, the planned resumption of total-led projects and the country’s recent removal from the international “grey list” for money laundering are seen as vital steps toward regaining investor confidence.
Formal discussions are expected to intensify around the IMF and World Bank Spring Meetings in Washington this April, with a post-financing assessment already scheduled for August 2026.
