According to the country's Annual Report on Public Debt, the failure to honour repayments stems from political instability and social unrest following disputed general election results in October.

The report, recently tabled in the Mozambican parliament, highlights how protests over alleged electoral fraud disrupted government operations and impacted the country's financial obligations.

Political economist Helio Guiliche says the default has significantly damaged Mozambique’s credibility on the international stage. “It has affected the country greatly because, as we know, Mozambique is coming off the back of a scandal involving hidden debts totalling more than $2 billion, which put financial institutions on notice,” said Guiliche.

He added that although the country is trying to recover, “the economic and financial system were connected, and this affected transparency and international trust.”

Guiliche also warned that internal mismanagement and corruption have deepened the crisis. “Mismanagement and corruption are top priorities and the major factors we can point to in terms of government performance. International markets are very sensitive to financial scandals,” he explained.

Mozambique is largely reliant on imports, and with declining revenues and a weakening local economy, the country is increasingly resorting to borrowing, both internally and externally.

According to Guiliche, this has created a high-risk environment. “Doing business with Mozambique is already a high-risk factor. The government must adopt clear, transparent measures to regain international trust,” he said.

The suspension of budget support by international partners has also worsened the fiscal situation. “Mozambique imports more than it exports. When we don’t perform economically well, we fall back on borrowing, which deepens the debt crisis,” Guiliche noted.

Concerns are also growing about the country’s increasing dependence on non-Paris Club creditors like China and Russia. “The type of debt has changed, but the effects remain the same, if not worse,” said Guiliche. “We’re just changing the players, but the way of playing is still the same.”

--ChannelAfrica--