Debt swaps and fiscal sustainability in Mozambique: evidence and implications in the age of AI
Keywords:
Public debt, Debt swaps, Fiscal sustainability, Mozambique, Financial innovation, Artificial intelligenceAbstract
This study examines the influence of debt-for-nature and debt-for-development swaps on fiscal sustainability in Mozambique, amid rising pressure on public debt in developing economies. We analyze annual data from 2006 to 2026 using a distributed lag autoregressive model to identify the macroeconomic determinants of debt dynamics. The findings indicate that domestic factors primarily explain debt sustainability. Economic growth lowers the debt-to-GDP ratio, while persistent budget deficits significantly raise it. In contrast, isolated one-off debt relief has no statistically significant effect. Debt swaps can create fiscal space and support strategic investments, but their impact depends on scale, institutional design, and integration into consistent macroeconomic policies. Therefore, these mechanisms should be considered complementary to, rather than substitutes for, fiscal reforms and strategies for sustained growth. The effectiveness of debt swaps depends critically on institutional quality and coordination with sound macroeconomic policies. Furthermore, artificial intelligence's potential to enhance the transparency, monitoring, and efficiency of these mechanisms is noteworthy, strengthening their contribution to economic resilience.
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Copyright (c) 2026 Pércio Valente Nhaondole, Carlos Mendes Guirruta
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