The Iraqi government has written off $256 million in oil debt that Mozambique has carried for decades, according to a statement from the Southeast African nation’s finance ministry.
Mozambique had owed Iraq a total of $320.2 million and will pay the remaining $64 million balance over 15 years starting in 2029, the ministry said in a statement on Tuesday.
The debt dates back to a 1979 and 1980 oil supply deal valued at $60 million, and the forgiveness followed negotiations this month in Abu Dhabi, Mozambique said.
The move comes as Mozambique, a resource-rich country with significant natural gas reserves, faces mounting economic challenges.
The nation has been struggling under a heavy debt burden, exacerbated by political and social instability. On February 7, Fitch Ratings downgraded Mozambique’s foreign-currency credit rating from CCC+ to CCC, citing reduced government revenues due to unrest and uncertainty over external funding, particularly during a period of high financing needs.
The debt forgiveness is expected to provide some financial relief to Mozambique as it works to stabilize its economy and address its fiscal challenges.
Decline in gas investments
Meanwhile, Mozambique is struggling to attract foreign investment for its $20 billion liquefied natural gas (LNG) project.
The UK government announced earlier this month plans to withdraw financial support for TotalEnergies’ $20 billion LNG project.
The decision is likely tied to ongoing uncertainty and security concerns that have kept the project suspended for more than two years.
The UK had initially committed $1.15 billion to the project through UK Export Finance, but the escalating violence in northern Mozambique prompted TotalEnergies to halt operations.
TotalEnergies CEO Patrick Pouyanne expressed uncertainty about the UK’s decision, stating that he is awaiting clarification on the matter. The withdrawal of UK support comes as the company seeks to secure re-approval for critical financing from the U.S. and other export credit agencies to revive the project.
The Mozambique LNG project, once seen as a cornerstone of the country’s economic development, faces significant delays and challenges, with its completion date now expected to be pushed back to 2029 or 2030.
