El Niño could deepen fiscal pressures in some of the world’s most indebted emerging markets, with Mozambique and Zambia particularly exposed because of their limited access to international financing and weak capacity to absorb economic shocks, Moody’s Ratings has warned.
The global credit rating agency said climate-related disruptions could force governments to increase spending on emergency relief, food subsidies and infrastructure reconstruction, while weakening agricultural output, electricity generation and economic activity. The combination could put further pressure on public finances, inflation and external balances, complicating debt management in countries already facing tight fiscal conditions.
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Moody’s said countries with high debt burdens, limited foreign exchange reserves and restricted access to external funding would have less room to respond. Mozambique and Zambia fall into this category, while sovereigns in parts of Asia and Latin America have greater flexibility because of stronger institutions and more reliable access to financing.
Agriculture is among the sectors most vulnerable to the expected weather effects. High energy and fertiliser costs are already raising production expenses and putting pressure on food prices. Further crop losses linked to El Niño could reduce output, weaken rural employment and worsen food insecurity, particularly in economies where agriculture remains an important source of livelihoods.
Mozambique faces the risk of domestic production losses, while agricultural exporters in Latin America could experience disruptions to shipments. The consequences could also spread to food-importing countries. Moody’s warned that export restrictions imposed by producing countries to protect domestic supplies could intensify shortages in net importers such as the Philippines.
India and Indonesia are better placed to manage potential agricultural disruptions, supported by larger food reserves and irrigation capacity. Countries with weaker domestic food production and limited fiscal resources, however, could face higher import bills and greater pressure to expand subsidies or provide emergency assistance to households.
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Electricity generation presents another significant risk. Prolonged drought can reduce output from hydropower plants in parts of Southern Africa and Latin America, forcing governments and utilities to ration electricity or rely on more expensive imports. Such measures could raise production costs, increase external financing needs and leave governments under pressure to provide additional support to state-owned power companies.
The risk is compounded by high energy prices. Moody’s expects Brent crude to trade between $90 and $110 per barrel for the rest of 2026, increasing the exposure of countries that depend heavily on imported fuel, have limited domestic energy supplies or lack diversified electricity generation. Low fuel stocks could further constrain their ability to manage supply disruptions.
Flooding could add to the financial burden through emergency response costs and damage to roads, power infrastructure and other public assets that governments may have to rebuild.
Although Southern African governments are expanding climate adaptation measures, including climate-smart agriculture, irrigation projects and early-warning systems, Moody’s said structural weaknesses continue to limit resilience in Mozambique and Zambia. Inadequate irrigation infrastructure and limited rural electricity access leave agricultural production and rural livelihoods more exposed to prolonged dry conditions.
The agency also warned that food shortages and rising prices could worsen undernourishment and social pressures in vulnerable communities. Lower agricultural employment, combined with higher household food costs, could deepen economic hardship and increase demands for government support.
For heavily indebted countries, the danger is that these pressures could occur at the same time. Lower agricultural and economic output may weaken tax revenues, while higher food and energy import costs increase demand for foreign exchange. Governments would also have to find additional resources for relief programmes, subsidies and reconstruction, potentially leaving less money available for debt servicing and other public spending.
The assessment places greater importance on fiscal buffers, access to financing and investment in infrastructure as governments prepare for climate-related shocks. Improved irrigation, stronger food reserves and more diversified energy systems could help reduce exposure, but countries with limited financing options may struggle to fund these measures while managing existing debt obligations.
Faith Omoboye is a foreign affairs correspondent with background in History and International relations. Her work focuses on African politics, diplomacy, and global governance.
