Mozambique’s budget dilemma, debt and turmoil could undermine the construction industry

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Mozambique’s budget dilemma, debt and turmoil could undermine the construction industry

The Mozambique Government Ministers Committee approved the draft law for the 2025 Economic and Social Plan and the National Budget (Pesoe) in late April 2025. The budget covers a total spending plan for 2025 at $512.8 billion ($8 billion), marking a decline of about 9% ($880 million) ($880 million) ($880 million) ($880 million) ($880 million). It also estimates revenues of 385.9 billion metica ($5.9 billion), marking an 11.9% increase in 2024 by 344.8 billion metica ($5.3 billion). This represents 126.8 billion Meticas (12.68 billion Meticas ($1.9 billion); this represents 8.2% of nominal GDP. In addition, the budget includes a forecast of a 2.9% growth in GDP in 2025, with an average inflation of 7%. The budget has not yet been approved by the Parliament of the Republic.

The budget is expected to increase the construction industry’s growth, and the government announced 3 billion metica ($45 million) in its 2025 budget to fund projects in the National Development Strategy (ENDE). This covers education, healthcare, water infrastructure, agriculture and transportation infrastructure projects.

22% of the total fund will be used for expansion and rehabilitation of water infrastructure.
14% of the total fund will be used to improve healthcare facilities, including vaccinations for children under one year old.
10.4% of the total funding will be used to build 12 middle schools, and 7.6% for the construction of 214 primary school classrooms.
9.6% of the total funding will be allocated to five technical and vocational education institutions.

The Sovereign Fund also outlines the government’s goal of building ten new dams, while completing the construction of two feed factories in Niassa and Nampula and installations at two new refrigerated warehouses in the Topuito and Beluluane industrial parks. In addition, to strengthen the entrepreneurship sector, the 150 new business startup suite will be mainly distributed in agriculture, mining, services and industrial sectors.

Pesoe also includes the implementation of a gas project in the Rovuma Basin, which will be carried out by French integrated energy and oil company Totalenergies and Italian energy company ENI. The implementation is part of the government’s forecast to attract $5.07 billion in foreign investment in 2025, up about 43% from 2024. However, this is still below the $5.1 billion in 2021.

It is worth noting that the budget has been delayed due to changes in government and post-election disruptions. In December 2024, the Constitutional Commission (CC) declared Daniel Chapo as the winner of the Mozambique presidential election, who won 65.17% of the vote and replaced outgoing President Filipe Nyusi, who received only 24% of the vote. The announcement sparked unrest across the country, mainly among supporters who opposed the candidates. Demonstrators took to the streets, erected roadblocks, plundered business, and clashed with security forces. Police responded with gunfire to disperse the crowd.

In view of political instability, the Mozambique government stated in late December 2024 that it had decided to expand the 2024 national budget on a temporary basis and is expected to approve the 2025 budget in the first half of the year. The 9% reduction in budget spending is attributed to government commitments to fiscal restrictions after post-election turmoil and uncertainty at the end of 2024, which adversely affects overall growth, economic activity and revenue generation. The expenditure plan outlined in the budget prioritizes wages, which will account for 14.6% of GDP, including limited social transfers and security regulations. In addition, debt interest is expected to account for 4.2% of GDP, which could pose a challenge to public investment as it could squeeze out expenditures on infrastructure projects. According to the latest forecast released by the International Monetary Fund (IMF) in April 2025, Mozambique’s public debt is expected to rise from 96.6% in 2024 to 101.1% of GDP in 2025. The increase in the debt-to-GDP ratio is attributed to investment in gas and hydropower projects. According to the International Monetary Fund (IMF), ongoing borrowing is used to develop liquefied natural gas (LNG) projects and is expected to be covered by gas revenue, but the country’s ability to generate all other debt payments through revenue remains uncertain in the medium to long term.

Additionally, Fitch is a global credit rating agency that lowers the country’s long-term foreign currency issuer default rating (IDR) in February 2025 to the “CCC” of “CCC+” due to weak public finances and rising debt. Unresolved political and social issues have reached the country’s financial position in December 2024 when government financing needs. The $900 million in interest paid European bonds in Mozambique increased from 5% per year in 2023 to 9% per year to 9% per year, from the total annual payments from US$45 million to 2028, the country’s payments increased from US$25 billion to US$25 billion, to US$25 billion, to US$250, to US$250, to US$250. Coupled with political unrest, it is expected to slow down the implementation of ongoing construction projects, posing a downside risk to the construction industry.

“Mozambique’s budget dilemma, debt and turmoil could undercut the construction industry”, originally created and published by the global equity brand World Construction Network.

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