The debt relief initiatives of the late 1990s and early 2000s significantly reduced the debt burden on many countries in the MEFMI region, including Mozambique. The 1996 Heavily Indebted Poor Countries initiative (HIPC), its 1999 enhancement, and the 2006 Multilateral Debt Relief Initiative (MDRI) reduced countries’ debt burden and improved their solvency. This, however, created additional space for new borrowing, including opportunities to access external non-concessional sources to finance development priorities. As a result, there has been a significant increase in public debt levels of most sub-Saharan African countries, including Mozambique, since 2012. Looking ahead, the financing requirements for the government of Mozambique are significant, as the country looks to developing the liquified natural gas sector and other priority investment projects.

As the development financing landscape is evolving, the scope for countries to tap into an array of alternative financing mechanisms is also widening. Each option is conceptually different in terms of purpose, conditions and process of negotiation, thus requiring different capacities to manage costs and risks for such flows. In addition, they have different implications to countries’ debt sustainability prospects. Nevertheless, Government has committed to keep and manage public debt at sustainable levels, in line with the broad objective of sustaining macroeconomic stability.

A joint MEFMI and World Bank Mission visited Mozambique during the period 12 to 22 February 2018 and assisted country officials develop a five-year debt management strategy for the period 2018 to 2022, and assess sustainability of existing debt and envisaged borrowing in the medium-term. The assessments aimed at defining the direction in which the authorities would steer the funding and structure of the debt portfolio to meet the Government’s debt management objectives. The mission also imparted knowledge and developed skills on the use of key public debt management tools for decision-making process, the IMF/World Bank MTDS Analytical Tool and Debt Sustainability Framework for Low Income Countries. At executive level, the mission team engaged senior government officials, including the Minister of Economy and Finance, the Permanent Secretary in the Ministry, and Director of Economic Studies at Banco de Mocambique.