Mozambique Dollar Bond Selloff Extends as Oil Price Shock Deepens Crisis
A selloff on Mozambique’s dollar bonds extended into a 10th day, as the oil shock from the Iran war deepens the country’s financial crisis.
The $900 million note due 2031 slipped on Wednesday to 78.18 cents, the lowest since April 2025. The securities have slumped over seven cents in price since the war started, making Mozambique among the hardest hit credits in Africa. The yield on the bond rose Wednesday to almost 15%, according to CBBT composite pricing.
But Mozambique’s troubles started well before the conflict, with the International Monetary Fund and World Bank already sounding warnings over persistent debt-funded overspending. While it hosts some $50 billion worth of gas projects, progress has been slow, and now, it faces paying higher prices for fuel and fertilizer imports.
Giulia Pellegrini, lead portfolio manager at Allianz Global Investors, highlighted Mozambique and Senegal as countries where the situation has deteriorated most as a result of the oil price spike. In both nations, bond yield spreads over Treasuries are well above the 1,000 basis-point level, the mark commonly seen as denoting distress.
“In Mozambique’s case, tapping into its gas wealth is still some way off with insecurity in the north of the country having delayed gas projects,” Pellegrini said.
Africa's Most Distressed Credits Stay Under Pressure
Mozambique, Senegal spreads move in lockstep
Note: Data displayed is on a closing basis as of March 24
Source: JPMorgan Chase & Co
Read More: World Bank Says Mozambique Deficits Risk $50 Billion LNG Project
Within Mozambique, local lenders report foreign exchange backlogs as high as $800 million.
Authorities managed to raise the equivalent of $4.88 million in a debt auction on Tuesday. However, that source of funding looks precarious, given that banks are already limiting their participation in such sales.
Absa Bank Limited strategists who visited the country last week said the government isn’t servicing domestic bonds, bilateral external debt or Treasury bills issued to finance its day-to-day operations. That’s likely to lock the government out of borrowing on domestic as well as international markets.
“It neither pays interest nor settles maturing paper, merely conducting switch auctions,” Phumelele Mbiyo, senior economist at the lender, wrote in a client note. “Only T-bills issued for monetary policy purposes are being settled.
All that makes it imperative for authorities to unlock funds from multilateral lenders. However, accessing the IMF lifeline requested last year requires implementing critical reforms, which the government has failed to do, the Washington-based lender said last month.
The next coupon on the 2031 dollar bond, a $45 million payment, doesn’t fall due until September. But Samir Gadio, head of Africa strategy at Standard Chartered expects the dollar bond to be under pressure from debt and financing vulnerabilities as well as fuel and fertilizer import disruptions.
An “overvalued exchange rate and a still uncertain time-line for IMF program discussions” further weighs on the credit, Gadio added.
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