Mozambique has drifted further into fiscal distress. Public debt arrears reached 1.3 percent of GDP by the end of 2025, according to the International Monetary Fund, revealing acute liquidity pressures and a widening gap between obligations and available financing.

The government accumulated 230-million dollars in external debt service arrears last year, equivalent to 0.9 percent of GDP. Payments to external creditors are delayed by an average of 79 days, a sign that cash flow constraints rather than solvency alone are driving the strain.

Large fiscal deficits, coupled with reduced access to external financing, have left the treasury struggling to meet commitments on time.

The arrears build up reflects structural weaknesses. Revenue mobilisation remains modest, spending pressures are elevated, and concessional funding has tightened. Commercial borrowing, where available, is expensive. Foreign exchange inflows have yet to provide sufficient relief. The result is a state operating under severe financing constraints.

Yet the IMF’s medium term outlook is strikingly more optimistic. Growth is forecast at two percent this year, before accelerating dramatically to 12 percent by 2030. That projection rests on the assumption that two liquefied natural gas projects begin production within the decade, transforming export receipts and fiscal revenues.

If realised, LNG exports would materially improve Mozambique’s external position and fiscal accounts, easing debt service pressures and rebuilding reserves. But the path is narrow. Project delays, security setbacks or weaker than expected gas prices would complicate adjustment and prolong fiscal fragility.

For now, Mozambique faces a familiar dilemma for resource rich frontier economies: endure austerity and arrears in the present, while wagering on hydrocarbons to secure the future.