Government admits that debt servicing represents a “source of pressure” on public accounts, but plans to reduce the ‘stock’ in relation to Gross Domestic Product (GDP) by almost half by 2027.
“A downward trend in the public debt stock in relation to GDP is forecast for the next three years, combined with a positive primary balance, which will continue to strengthen the country’s financial position. This trend reflects the medium-term fiscal policy and strategy, which persistently seeks primary surpluses,” reads the Medium-Term Fiscal Scenario (MTFF) until 2027.
According to the document, approved this month by the Council of Ministers and to which the Lusa news agency had access, the government admits that “despite the positive trend towards strengthening the country’s fiscal position”, debt servicing and financial operations “continue to be a source of pressure in 2024”.
“They are expected to remain at peak levels until 2026,” it points out, admitting that 60 per cent of spending “will be on domestic debt and 40 per cent on external debt”.
In 2026, the Mozambican government forecasts a peak in domestic and foreign debt repayments of 82,553 million meticals (1,205 million euros).
“This pressure is mainly influenced by the maturity and consequent repayment in full or in instalments of the principal on treasury bonds between 2024 and 2026. However, this pressure is expected to begin to diminish in the medium term, as the need to issue domestic public debt to finance treasury deficits is expected to decrease, promoting more efficient debt management,” it reads.
In addition, it adds, the government “intends to prioritise” the use of Treasury Bonds (OT), with longer maturities, to the detriment of Treasury Bills (BT), which are for a maximum of one year, “which could extend the debt profile and reduce refinancing costs”.
“With these measures, a significant reduction in the proportion of domestic public debt in relation to GDP is expected by 2027, thus strengthening the country’s financial position,” says the document, recognising that debt servicing in the external component “may remain stationary until 2027, and should grow with the start of Eurobond MOZAM repayments.”
According to the document, the public debt ratio “improved in 2023, falling to 73.8 per cent of GDP compared to 78.6 per cent in 2022”, a reduction that represents “a positive indicator for the country’s fiscal sustainability, suggesting that the economy is growing at a faster rate than debt”.
“This strengthens the government’s ability to honour its debt commitments in the long term. This ratio is made up of 73.8 per cent Central Government debt and 2.9 per cent State Business Sector debt,” he says.
By 2027, the government hopes to reduce the public debt stock to a ratio of 47.2 per cent of GDP.
The Medium-Term Fiscal Scenario was drawn up by the government with the aim of “translating strategic development objectives into realistic and sustainable financial projections”, providing “a solid basis for decision-making and the efficient allocation of resources”.
“By projecting public revenue and expenditure for the next three years, financial challenges and investment opportunities can be identified that will help guide effective policies and the efficient allocation of resources.”
The government estimates, with measures on the tax revenue side and on the operating expenditure side, to generate gains of 8,683 million meticals (126.8 million euros) in 2025, rising to 16,735 million meticals (244.4 million euros) the following year and to 21,617 million meticals (315.6 million euros) in 2027.
Lusa
