The Bank of Mozambique has recognised the effects on the economy of the state’s domestic indebtedness, which has already grown by 90.3 billion meticais (€1.269 billion) in 2024.
“The pressure on domestic public indebtedness remains high,” reads a note released after Monday’s ordinary meeting of the Monetary Policy Committee (CPMO). “Domestic public indebtedness, excluding loan and lease contracts and overdue liabilities, stands at 402.7 billion meticais” or €5.659 billion.
In the same note from the CPMO – a body that meets every two months – it is emphasised that the current level of domestic debt “represents an increase of 90.3 billion meticais compared to December 2023.”
The document adds that international reserves are “at comfortable levels” at present.
“Gross international reserves continue to grow and are at levels sufficient to cover more than five months of imports of goods and services,” the CPMO report points out.
Last Tuesday, Mozambique placed another 609 million meticais (€8.6 million) in a domestic stock market issue of Treasury Bonds (OTs) with a maturity of five years.
According to information from the Mozambique Stock Exchange, bids submitted by Specialised Treasury Bond Operators indicate that the demand and supply ratio was 22.51%, with total demand 1,209 million meticais (€17 million).
This OT issue, the 10th in 2024, for direct subscription by the specialised operators, authorised the placement of up to 5.370 billion meticais (€75.4 million), with a fixed nominal interest rate of 15% during the first four half-yearly interest payments and variable for the last six payments.
The domestic public debt issued by Mozambique had reached 364.251 billion meticais (€5.117 billion) in May, so growing by the equivalent of another €730 million in the first five months of 2024, according to previous data from the central bank.
In April, Mozambique’s Ministry of Economy and Finance, in its public debt report for 2023, warned of the pace of growth of domestic debt, which it said could threaten the process of reversing the debt’s unsustainability: “If domestic debt continues to grow at the current rate over the next five years, the breakdown of the ‘stock’ could balance out at 50% domestic/50% external by 2029, with a portfolio dominated by purely commercial instruments, a scenario that would jeopardise the chances of reversing the unsustainability of the debt in this generation.”
As interest rates on Treasury Bills (BTs, with short maturities) and Treasury Operations (OT, longer maturities) “have risen, the cost of domestic financing has driven a continuous upward adjustment of the weighted average interest rate on the government’s loan portfolio,” it notes.
The rate went from “5% in 2021 to 5.8% in 2022 and now 6.5% in 2023, making for a cumulative increase of 150 basis points in two years,” says the report, which also warns that the “refinancing risk, reflected in the growing concentration of maturities” of public debt “on the short-term horizon, represents the greatest vulnerability.”
Accumulated domestic public indebtedness at 31 December 2023 totalled the equivalent of $4.9113 billion (€4.616 billion). The weight of BT issues in the total stock rose from 4% in 2019 to 9% in 2023, while that of OT doubled to 16% in the same period.
