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MEF: Public Debt Grows by 2.8% to Almost 1 Trillion Meticals in Q1

MEF: Public Debt Grows by 2.8% to Almost 1 Trillion Meticals in Q1

Budget execution data from the Ministry of Economy and Finance (MEF) indicates that the country’s public debt stock grew by 2.8 per cent in the first quarter of 2024, to 999 billion meticals (14.5 billion euros).

‘In line with the trend of stabilisation of the external debt stock, during the first quarter the government did not take out any new loans, having in the meantime initialled six financing agreements in the form of grants totalling 194.9 million dollars (12.3 billion meticals) with multilateral partners, namely the World Bank and the African Development Bank.’

Ministry of Economy and Finance

Of the state’s total debt on 31 March 2024, 651.1 billion meticals (9.4 billion euros) corresponded to external debt (multilateral, bilateral and sovereign debt securities), which in this case fell compared to the first quarter of 2023, when this ‘stock’ was 615.6 billion meticals (8.9 billion euros). The report, to which Lusa had access this Wednesday, 8 May, indicates that this total volume of debt, contracted internally and externally, compares with 971.4 billion meticals (14.1 billion euros) in the same period of 2023.

According to the Lusa news agency, internal debt, which includes the issue of Treasury bills and bonds, as well as loans from the Bank of Mozambique, went from 313.7 billion meticals (4.5 billion euros) to 347.8 billion meticals (five billion euros) in one year.

A previous report by the Ministry of Economy and Finance, from April, on public debt warns of the rate of growth of domestic debt, which, if it continues, threatens the process of reversing its unsustainability ‘in this generation’.

‘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 per cent domestic or 50 per cent 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.’

MEF report on public debt in 2023

The document adds that, as interest rates on Treasury Bills (BT, short maturities) and Treasury Operations (OT, longer maturities) ‘have increased, the cost of domestic financing has been driving a continuous upward adjustment of the weighted average interest rate of the government’s loan portfolio’.

‘The rate went from 5 per cent in 2021 to 5.8 per cent in 2022 and now 6.5 per cent in 2023, making 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 public debt maturities on the short-term horizon, represents the greatest vulnerability’.

According to the same report, Mozambique’s domestic debt, accumulated until 31 December 2023, amounted to the equivalent of 4.9 billion dollars (309.6 billion euros). The weight of BT issues in the total stock of Mozambican debt went from 4 per cent in 2019 to 9 per cent in 2023, while the weight of OT went from 8 per cent to 16 per cent in the same period.

‘In the last two years, the average time to maturity has fallen from ten to eight years, which suggests that each year the average maturity of the government’s portfolio falls by one year. Just over a third of all debt matures within a year. In the current climate of pressure on the state treasury, this overloaded cycle of domestic debt maturities increases the risk of a scenario materialising over the course of the year in which the treatment of overdue instalments by commercial refinancing will be the only option available to the government.’

Ministry of Economy and Finance

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