Mozambique’s domestic debt increased by 26% in the first nine months of 2024, reaching 396 million meticals (6.1 million dollars) at the end of September, according to the budget execution report from the Ministry of Economy and Finance (MEF), Lusa reported on Monday, 4 November.
According to the MEF, the increase in the stock of domestic debt, which totalled 313.7 million meticals in December 2023, is mainly due to new issues of Treasury Bills (BT) and Treasury Bonds (OT). These financing operations totalled 209.8 million meticals over the first nine months of 2024, aimed at meeting the state’s liquidity needs.
During the same period, the state amortised domestic public debt to the tune of 127.5 million meticals, especially Treasury Bills.
The MEF report also details that, in addition to amortisations related to BT and OT, the government disbursed 537.8 million meticals to settle debts with suppliers of goods and services from previous years, as part of Fiscal Restructuring and Consolidation.
At the end of September, Mozambique’s accumulated public debt totalled 1.1 billion meticals, of which 648.8 million meticals correspond to external debt, which showed a slight reduction compared to the end of 2023.
IMF warning on short-term debt
In July, the International Monetary Fund (IMF) expressed concern about Mozambique’s dependence on issuing short-term public debt, a practice which, according to the organisation, raises the country’s ‘financing risks’.
According to the organisation, the proportion of short-term domestic debt rose from 19% of Gross Domestic Product (GDP) in 2019 to 28% of GDP in 2022, which increases the refinancing risks for the Mozambican government.
Medium-term debt represents the largest slice of domestic debt, with 50 per cent of the total in 2023, but the IMF points out that short-term debt has increased significantly in recent years, rising from 19 per cent to 27 per cent between 2019 and 2023. It also warned that the Mozambican authorities have been reluctant to accept higher rates for long-term domestic debt, which is reflected in the low demand for Treasury Bonds, with an average bid of 62 per cent in April and May 2024.
The IMF also noted that the spread of Treasury bill rates, with shorter maturities, over the monetary policy rate increased from around 50 basis points at the beginning of 2023 to more than 200 basis points in April 2024.
