The Bank of Mozambique (BoM) acknowledged on Monday, December 2, that there is “high pressure” caused by the state’s internal indebtedness, which this year grew by 95.7 billion meticals (1.4 billion dollars).
According to information shared by the central bank, domestic public indebtedness, excluding loan and lease contracts and overdue liabilities, now stands at 408.1 billion meticals (6.3 billion dollars).
“The pressure on domestic public debt remains high. It has grown by around 5.5 billion meticals since the meeting of the Monetary Policy Committee (CPMO) on September 30,” said the BoM in a document quoted by Lusa.
According to the financial institution, the weight of domestic debt as a function of Gross Domestic Product (GDP) went from 18.1% in December 2020 to 26.5% in November this year.
The Ministry of Economy and Finance had already indicated in April that the rapid growth of domestic debt, combined with the increase in interest rates on Treasury Bills and Bonds, is making public financing more expensive.
The weighted average interest rate on the government’s loan portfolio rose from 5% in 2021 to 6.5% in 2023, accumulating an increase of 150 basis points in two years. This growth puts pressure on the public budget, especially in a context of greater concentration of maturities in the short term, which increases the risk of refinancing.
Domestic debt issues have been a central tool for Mozambique’s financial management, allowing the government to raise funds without resorting to external loans.
However, the rate of growth of this debt raises concerns about long-term sustainability and the associated costs, at a time when interest rates are rising due to the global economic context.
