Maputo - Mozambique said on Monday it would miss a $60m interest payment on a 2023 bond, as its economic crisis deepens over hidden debt, the fall in commodity prices and a cut-off in aid.
The country is in talks with the International Monetary Fund (IMF) over resuming support that was suspended in April due to the hidden debt scandal.
"The deteriorating macroeconomic and fiscal situation of the Republic has severely affected the country's public finances," the finance ministry said in a statement in Maputo.
"The resulting debt payment capacity of the Republic is therefore extremely limited in 2017, and does not allow the Republic room to make the scheduled interest payment."
The statement said Mozambique would not pay a $60m interest payment due on January 18.
Last month, a parliamentary inquiry concluded that the government broke the law by securing loans worth more than $2bn in hidden debt that prompted the IMF and World Bank aid cutoff.
The scandal surfaced in 2013, when the government announced a contract for 30 fishing and coastal protection vessels between French shipyards and Ematum, a state-owned company that had previously raised $850m on the eurobonds market without lawmakers' knowledge.
In April last year, more hidden debt worth $1.4bn - contracted without parliamentary approval by two more state-owned firms and the defence ministry - was uncovered.
The government claimed the loans were used to fund military vessels and defence equipment, and said it did not disclose them as a matter of national security.
The metical currency collapsed by more than 80% against the US dollar last year after falling 36% in 2015.
Vast reserves of gas have been discovered in the north of the country since 2010 but exploration has been slow and gas prices have fallen in recent years.