The Minister of Economy and Finance, Max Tonela, admitted to Parliament on Wednesday (15) the possibility of issuing new public debt products in order to rationalise domestic debt and ensure its sustainability.
At stake, he explained, is the government’s approval, in June 2022, of the Medium-Term Strategy for Public Debt Management for the period 2022 to 2025, providing for “a set of measures to rationalise domestic indebtedness”.
“In order to make these measures viable, reforms are being considered that aim to create efficient channels for non-bank creditors to participate in the market and broaden the range of market participants, also introducing the segment of institutional investors with a natural preference for long-term assets, such as pension funds and insurance companies,” said the minister, when presenting the final report of the General State Account for 2022 in Parliament.
“Among the key reforms to this end are the rationalisation and diversification of the methods of issuing Treasury Bonds, including the introduction of new public debt securities,” he also listed.
Mozambique currently issues Treasury bills, with short maturities, and Treasury bonds, with longer maturities, through stock exchange auctions.
This Wednesday, Max Tonela added that still in the public debt chapter, the Executive “has improved the assessment of fiscal risks and more prudent debt management, including the State Business Sector”, pointing out that despite the challenges relating to public debt management in the 2022 financial year, the country has seen an improvement in sustainability indicators in relation to GDP, which stood at 78.2 per cent compared to 80 per cent at the end of the previous year.
“We have established a new medium-term public debt management strategy and we will continue to work to rationalise domestic debt issuance levels and guarantee reform measures that promote more competitive terms and conditions,” he concluded.
In October, the Mozambican government placed more than 6.1 billion meticais in a single Treasury Bond issue through the Mozambique Stock Exchange (BVM), reaching 96% of the limit set for 2023.
According to BVM data to which Lusa had access, the issue involved an operation for direct subscription by Specialised Treasury Bond Operators (OEOT) of up to 6.1 billion meticais – which was completely filled – relating to the ninth series of 2023 Treasury Bonds, carried out by securitisation and not by auction, as in previous operations.
This is an operation to issue 61.6 million registered bonds, each worth 100 meticais, with a maturity of six years, providing for interest payments of 18% per year until October 2025 and a variable rate in the following four years.
Thus, since January, Mozambique has placed 35.1 billion meticais in Treasury Bonds through BVM, with the legal availability to issue a further 1.5 billion meticais by the end of the year.