Mozambique’s Debt Interest Costs Rise 12% Amid Growing Economic Concerns

In 2024, Mozambique’s debt interest costs rose by 12% to €857.4 million. Domestic debt payments grew by 13%, while external payments increased by 9.5%. Total public debt surpassed €15.8 billion, and the Ministry of Economy and Finance has signaled concerns over the sustainability of current debt levels, with risks associated with short-term financing.

In 2024, Mozambique’s debt interest costs escalated by 12% to 57.608 billion meticais (€857.4 million), according to official data accessed by Lusa. This figure contrasts with the 2023 expenditure of 49.929 billion meticais (€743 million) on debt servicing. Domestic debt interest surged by 13% in 2024, exceeding 45.691 billion meticais (€680 million), while external debt interest payments rose by 9.5%, nearing 11.395 billion meticais (€177.6 million).

Mozambique’s total public debt stock surpassed one billion meticais (€15.8 billion) in 2024, showing a 9% annual increase. From January to December 2024, the state’s debt reached nearly 1.069 billion million meticais. As of December 31, the domestic debt alone was reported at over 407.085 billion meticais (€6,139 million), while external debt exceeded 636.548 billion meticais (€9,600 million).

The document cites a 1.4% increase in external debt due primarily to adjustments from the new debt management system named ‘Meridian.’ Domestic debt, however, saw a substantial rise of 21.8%, largely attributed to the issuance of short-term Treasury Bills valued at 46.162.9 billion meticais (€696.2 million) and a Credit Facility with the central bank worth 28.100 billion meticais (€423.8 million).

A report from the Mozambican Ministry of Economy and Finance highlighted concerns about the rapid growth of domestic debt. Should this trend persist, the ratio of domestic to foreign debt could equalize by 2029, raising questions about the sustainability of the current debt model. “If domestic debt continues to grow at the current rate… it would compromise the possibilities of reversing the debt’s unsustainability in this generation,” stated the document.

As interest rates on short and long-term Treasury Bills have risen, the cost of domestic financing has increased, leading to a 150 basis point hike in the average interest rate on government loans over two years. The report warns that the increasing concentration of public debt maturities in the short term could pose significant refinancing risks.

In summary, Mozambique faces rising interest costs on its debt, with a reported increase of 12% in just one year. The growth in both domestic and external debt reflects broader economic challenges and raises sustainability concerns. The government’s ministry cautions that continuing trends could lead to a precarious debt situation, underscoring the importance of effective management and fiscal policies.

Original Source: clubofmozambique.com

About Allegra Nguyen

Allegra Nguyen is an accomplished journalist with over a decade of experience reporting for leading news outlets. She began her career covering local politics and quickly expanded her expertise to international affairs. Allegra has a keen eye for investigative reporting and has received numerous accolades for her dedication to uncovering the truth. With a master's degree in Journalism from Columbia University, she blends rigorous research with compelling storytelling to engage her audience.

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