Mozambique exchanged 3,694 million meticais of internal debt for new issuance, totaling approximately 52.9 million euros. Despite an upper limit of 5.2 billion meticais, demand totaled 3,744.2 million meticais, showcasing a 72% supply-demand ratio. Public debt has increased, with interest charges rising by 12% in 2024, highlighting concerns regarding sustainability and refinancing risks.
On Tuesday, the Government of Mozambique successfully exchanged an internal debt issuance from 2021 for a new issuance, amounting to over 3,694 million meticais, which is equivalent to approximately 52.9 million euros. This marked the first debt operation of the year, as reported by Lusa.
The Mozambique Stock Exchange (BVM) specified that the upper limit for this internal debt exchange was set at 5.2 billion meticais, or about 74.5 million euros; however, the operation did not reach this threshold. Total demand for the issuance amounted to 3,744.2 million meticais, or 54.1 million euros, resulting in a supply-to-demand ratio of 72%. This included a substantial focus on the demand for the exchange of Treasury Bonds.
The BVM elaborated that the allocated total demand of the issuance reflected 98.66% of the overall value, translating to 3,694,208,500 meticais for the exchange from the third series of 2021 Treasury Bonds to the first series of 2025 Treasury Operations, alongside 50 million meticais in new allocations.
According to a report from Lusa, interest charges on Mozambique’s debt have risen by 12% this year, totaling 57.608 billion meticais, equivalent to 857.4 million euros. This increase is notable compared to the 49,929 million meticais spent in 2023, with domestic debt interest payments growing by 13%, ultimately reaching over 45,691 million meticais.
The total public debt stock of Mozambique surpassed one billion meticais in 2024, representing a 9% increase year-on-year. The domestic debt alone totaled over 407,085 million meticais, while the external debt exceeded 636,548 million meticais. This data indicates that external debt rose by 1.4% in 2024, while internal debt saw a significant increase of 21.8%, primarily due to short-term debt issuance through Treasury Bills.
A report from the Ministry of Economy and Finance warned in April about the continuous growth of domestic debt. If this trend persists, the debt distribution could balance out to 50% domestic and 50% foreign by 2029. This scenario may jeopardize the sustainability of debt levels moving forward, creating reliance on purely commercial instruments.
The report further indicated that as the interest rates on Treasury Bills and Treasury Operations have increased, the cost of domestic financing has also risen. Between 2021 and 2023, the weighted average interest rate on the government loan portfolio has escalated from 5% to 6.5%. It also pointed out that refinancing risks are elevated due to the concentration of public debt maturities in the short term.
In summary, Mozambique’s recent internal debt exchange reflects ongoing challenges in managing public debt, as interest charges and total debt levels have increased significantly. The BVM’s data indicates a continued reliance on short-term debt instruments, raising concerns about long-term sustainability. The government’s efforts to balance domestic and foreign debt are critical to mitigate risks and ensure fiscal stability moving forward.
Original Source: clubofmozambique.com
