Mozambique's economic week was shaped by new public debt management operations, government targets to contain the state wage bill, and the Bank of Mozambique's (BdM) formal consolidation of foreign exchange exposure limits for commercial banks. The three measures share a common thread: an effort to reduce pressure on public finances and reinforce financial system stability in an environment still constrained by elevated indebtedness and a narrow fiscal margin.
According to data from the Mozambique Stock Exchange (BVM), the state concluded two Treasury Bond (OT) swap operations on 6 August, placing more than 1.8 billion meticais (€25.2 million) in new securities.
The operations allowed the government to replace debt maturing in 2026 with longer-dated instruments, easing immediate financing pressures.
The first operation, designated OT-2026-S8, offered a subscription of up to 4.2 billion meticais (€57.3 million) to Specialised Treasury Bond Operators (OEOT). Conducted through a swap auction of the 2022 OT – 7th series, it resulted in the placement of nearly 1 billion meticais (€14 million).
The second operation, OT-2026-S9, with a maturity date of 6 August 2031, provided for the exchange of debt of up to 2.1 billion meticais (€29 million). A total of 818.6 million meticais (€11.2 million) was placed.
With these two operations, the cumulative value of treasury bond swaps carried out in 2026 reached 39.8 billion meticais (€544.2 million).
The strategy allows the state to defer near-term maturities, although it keeps the cost of debt elevated, with interest rates close to 13%. Eighteen treasury bond issuances are planned for this year, totalling 34.2 billion meticais (€467.9 million).
Government targets wage bill reduction
The debt management activity coincided this week with the presentation of new targets to contain public expenditure. The government intends to reduce the share of the state wage bill from approximately 12% of gross domestic product (GDP) in 2027 to 10.7% by 2029.
The target is set out in the Medium-Term Fiscal Framework (CFMP) 2027–2029, approved by the Council of Ministers, which establishes the main macroeconomic and fiscal projections for the next three years.
The document identifies as priorities the preservation of macroeconomic stability, public debt sustainability, and the gradual recovery of fiscal space to finance investment and other development priorities.
According to official projections, the economy is expected to grow 1.6% in 2027, accelerate to 3.7% in 2028, and reach 9.5% in 2029. Excluding the contribution of the gas sector, however, growth is projected to be considerably more modest: 1.4%, 2.8%, and 3.7%, respectively.
Inflation is projected to decline from 8.7% in 2026 to 5.5% by 2029.
Containing the wage bill is one of the central components of the fiscal consolidation strategy. The government also plans to reduce the public debt-to-GDP ratio from 72.1% in 2026 to 67.1% in 2029.
To curb growth in personnel expenditure, the CFMP provides for limiting new hires, strengthening audits and proof-of-life checks, accelerating retirement processes, and reviewing certain allowances and seniority bonuses.
Among the measures envisaged is a 50% reduction in civil and special seniority bonus rates, alongside the continuation of an accelerated retirement programme.
In nominal terms, state operating expenditure is projected to reach 360.5 billion meticais (€4.9 billion) in 2027, fall to 347.4 billion meticais (€4.8 billion) in 2028, and edge slightly higher to 350.9 billion meticais (€4.8 billion) in 2029.
BdM formalises bank FX exposure limits
On the financial system front, the principal development of the week was the permanent incorporation into the prudential framework of foreign currency exposure limits that had been in force on an exceptional basis since August 2025.
The Bank of Mozambique maintained the limit on the overall long foreign exchange position of credit institutions at 2% of own funds.
The decision is set out in Notice No. 5/GBM/2026 of 28 July, which amends the Regulation on Prudential Ratios and Limits for Credit Institutions and entered into force on 3 August.
Under the rules, banks may not hold, at the close of each business day, an overall long foreign exchange position exceeding 2% of their own funds, while the overall short position remains capped at 20%.
By individual foreign currency, the long position may not exceed 1% of own funds, and the short position remains limited to 10%.
The amendment does not, however, represent a fresh tightening of limits imposed on the banking sector. The same thresholds had already been established by the BdM through Notice No. 4/GBM/2025 of 1 August, initially under an exceptional regime.
The principal change is therefore regulatory in nature: the limits are no longer transitional but are now formally embedded in the prudential framework applicable to credit institutions.
At a moment when the state is managing debt maturities, seeking to reduce the pressure of wage expenditure, and working to preserve financial stability, this week's measures point to the same underlying challenge: recovering fiscal room for manoeuvre without undermining the financing of the broader economy.
Source: Diário Económico
Original article: https://www.diarioeconomico.co.mz/?p=530646
