Maputo — The Standard & Poor's (S&P) rating agency, based in New York and London, has warned that the Mozambican government will face challenges to pay its domestic debt, totalling about 1.1 billion US dollars, over the next two years.

According to Leon Bezuidenhout, deputy director of S&P's sovereign ratings department, in an interview with the Bloomberg agency, the domestic debt payments that Mozambique will have to make in 2025 and 2026, are equivalent to 620 and 530 million dollars.

"This is something that will pose potential challenges and the need for political compromises for the government. Even so, the local financial system still has the capacity to absorb additional issues, despite interest rates being extremely high', he said.

The increase in domestic public debt came about as a result of Mozambique's withdrawal from the international financial markets following the scandal of the "hidden debts', a term which refers to the illicit loans of over two billion US dollars which three fraudulent, security-related companies, Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management), obtained in 2013 and 2014 from the banks Credit Suisse and VTB of Russia, on the basis of sovereign guarantees issued by the government of the then President, Armando Guebuza. The guarantees smashed through ceilings laid down in the 2013 and 2014 budget law, and were signed by the then Finance Minister, Manuel Chang, without parliamentary approval.

This forced the country to resort to domestic debt to finance public expenditure.

According to Bezuidenhout, the increase in debt was also the result of a government programme designed to simplify expenditure on public admimistration wages, but it had the opposite effect, leading to warnings from the International Monetary Fund (IMF).

The IMF expects that the Mozambican economy will grow by around five per cent this year, but with a public debt rising to 97.5 per cent of Gross Domestic Product (GDP), one of the highest in Africa,