Maputo, July 8, 2026 (Lusa) - The Bank of Mozambique considers that the country’s sovereign risk remained at a “severe” level in 2025, due to the pressure exerted by the continued rise in domestic public debt.
The assessment contained in the central bank’s 2025 Financial Stability Report, seen by Lusa on Wednesday, states that domestic debt rose by 16.5% year-on-year, from 407 billion meticais (€5.58 billion) in 2024 to 474 billion meticais (€6.5 billion) in 2025.
“Sovereign risk remained at a severe level,” the central bank noted in the document, adding that the persistence of this level stems from “pressure on domestic public debt”.
The document identifies public debt as one of the main vulnerabilities of the national financial system, noting that pressure has focused mainly on the domestic component of the debt, driven by the use of government bonds and treasury bills to finance the state’s cash flow requirements.
The Bank of Mozambique also noted that prompt government payments can strengthen confidence in sovereign bonds and help promote more flexible interest rates in the interbank market.
In a forward-looking stress test for 2027, the central bank concluded that “high exposure to sovereign assets represents the most significant challenge to the sector’s capitalisation”, highlighting the opportunities associated with strengthening the link between the banking sector and public debt.
Despite this, the overall systemic risk index fell to 29.86%, remaining at a moderate level.
In another assessment, published in May following the Monetary Policy Committee (CPMO) meeting, the Bank of Mozambique highlighted that the “high” volume of arrears and public debt continues to affect the functioning of the financial market and bank liquidity.
“Public debt and arrears on domestic and external debt remain high, affecting the normal functioning of the financial market and bank liquidity,” reads the statement issued following the CPMO meeting.
The central bank then noted that domestic public debt, excluding loan and lease agreements and overdue liabilities, had risen to 493.1 billion meticais (€6.63 billion), an increase of 18.5 billion meticais (€248.7 million) compared with 31 December 2025.
“Delays in the repayment of domestic and external public debt persist, including to national financial institutions and multilateral creditors, with impacts, amongst other things, on the weak appetite for government securities, the rigidity of interbank money market interest rates and the country’s risk assessment,” it stated.
The International Monetary Fund (IMF) noted in February that Mozambique “faces increasingly challenging financing conditions”, citing delays in debt servicing and reduced financing availability for the government.
In the conclusions of its Article IV consultations, the IMF noted that domestic banks’ holdings of government bonds, the main source of financing for budget deficits, had stagnated, whilst net external financing had turned negative.
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