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Investing.com -- S&P Global Ratings has affirmed Mozambique’s ’SD/SD’ long-term and short-term local currency sovereign credit ratings and ’CCC+/C’ long-term and short-term foreign currency ratings, maintaining a negative outlook on the foreign currency rating.
The ratings agency cited ongoing fiscal pressures that have led to rising arrears on domestic and external official debt. Mozambique’s economic challenges have been compounded by post-election protests in October 2024, persistent delays in liquified natural gas (LNG) projects, and the suspension of the country’s IMF program in April 2025.
S&P noted that payment delays on government treasury bonds have sometimes extended up to three months, while arrears have accumulated to domestic suppliers and official external creditors, including the IMF, World Bank, and Portugal.
Earlier in 2025, Mozambique undertook a domestic debt exchange that S&P viewed as distressed and tantamount to default. The agency believes that without this switch, the government would likely have been unable to fulfill its debt obligations on time and in full.
The negative outlook on the foreign currency rating reflects ongoing external financing constraints and risks of further delays to planned gas projects and foreign aid, which could affect Mozambique’s ability to service its foreign currency debt obligations in the next 12-24 months.
Despite these pressures, S&P’s baseline expectation is that the government will continue servicing its 2031 Eurobond obligations, which include annual coupon payments of $81 million and principal repayments of $225 million annually over 2028-2031. This view is supported by the government’s stronger foreign exchange reserve position, which reached $3.9 billion as of July 2025.
Mozambique’s economic recovery prospects are weakened by persistent domestic foreign exchange shortages, driven by subdued coal exports, delays in LNG project execution, and constrained external financing. These factors have curtailed imports and led to a significant contraction in credit to the economy.
The country’s real GDP has contracted for three consecutive quarters, with electoral unrest having a pronounced impact on economic activity. S&P has revised its real GDP growth forecast for 2025 down to just 0.8%.
Looking ahead, Mozambique’s long-term economic outlook could benefit significantly from its expanding gas export potential. Production at the Coral South floating LNG platform began in November 2022, and in October 2025, Eni approved the $7.2 billion Coral North LNG platform.
S&P understands that TotalEnergies’ $20 billion Area 1 LNG project could resume in the near future, contingent on continued improvements in the security situation in Cabo Delgado. The restart of Area 1 is also expected to accelerate progress on ExxonMobil’s $30 billion Area 4 LNG project.
The agency projects the budget deficit on a cash basis will remain wide, averaging 4.2% of GDP over 2025-2028 from 4.7% in 2024, assuming ongoing revenue shortfalls, spending pressures, and weaker growth.
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