Mozambique Weighs Swapping Dollar Debt for Yuan in China Talks

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(Bloomberg) — Mozambique is considering converting the $1.4 billion it owes China into renminbi loans as part of a debt restructuring with its biggest bilateral creditor, in line with similar moves by other African sovereign borrowers.

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“This is usually a possibility that the cooperation partner raises,” the finance ministry said in response to questions at the weekend. “In this specific case, it was a valid possibility that was put on the table.”

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Mozambique is facing a worsening liquidity crunch. The International Monetary Fund and World Bank warned in recent weeks that the government’s debt was unsustainable, with growing payment arrears. Fitch Ratings last month cut its assessment of the nation’s creditworthiness, saying a default was probable.

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Moving dollar debt into yuan would be the latest African example of China’s efforts to internationalize its currency and make inroads into the dollar’s dominance.

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Kenya last year converted three loans from the Export-Import Bank of China — which originally totaled $5 billion — into renminbi, curbing debt-service costs and easing currency pressures. Ethiopia is considering a similar deal. And Zambia, which recently started accepting mine-tax payments in yuan, held talks with China for a currency swap.

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Still, the renminbi’s share of global foreign-exchange reserves remains less than 2%, compared with the dollar’s 56.8%, according to the IMF. The data showed the Chinese currency gaining three basis points of the total share in the fourth quarter of 2025, compared with the previous three months, as the dollar ceded 16 basis points.

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The gas-rich southeast African nation is also in talks with Beijing over a debt-for-development swap. That may rank it among the first African nations to strike such deal with China, after Egypt signed a memorandum of understanding with the world’s biggest bilateral creditor last year. 

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Mozambique is currently working on designing a project that would benefit children, and others will follow.

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“The government intends to extend the scope of this window/mechanism to convert part of the debt into investments directed towards strategic projects,” the finance ministry said in its responses. These areas include agriculture, energy, resilient infrastructure, social development, health, education and climate risk management.

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The Chinese Embassy didn’t respond to calls seeking comment.

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Finance Minister Carla Loveira joined President Daniel Chapo on a visit to China last month, where she discussed restructuring Mozambique’s debt to the Asian nation, which totaled more than $1.4 billion by the end of 2024, according to IMF data. 

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Mozambique holds some of Africa’s richest natural gas reserves, with companies led by Total Energies SE and Exxon Mobil Corp. planning on spending about $50 billion to develop them. Yet these projects have faced years of delays, and will only start exporting the fuel from the end of the decade. 

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The nation’s $900 million bond starts amortizing from 2028, with $225 million in yearly repayments due. The government is seeking a new funding program with the IMF after abandoning the previous one last year.

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—With assistance from Matthew Hill.

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