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Public Debt Grows By $805M in Five Months and Reaches $5.6B

Public Debt Grows By $805M in Five Months and Reaches $5.6B

The Bank of Mozambique (BoM) revealed that domestic public debt totalled 364.2 billion meticals (5.6 billion dollars), after growing by around 51.9 billion meticals (805.1 million dollars) in five months.

‘The domestic public debt contracted between December 2023 and May 2024, excluding that resulting from loan contracts, leases and overdue liabilities, increased by around 51.9 billion meticals,’ said the central bank in its Economic Situation and Inflation Outlook report, published by Lusa.

According to the document, overall, the debt issued domestically represented the equivalent of 23.7% of the national Gross Domestic Product (GDP) by 28 May, consisting mainly of Treasury Bills, with a stock of 99.8 billion meticals, and Treasury Bonds, which totalled 169 billion meticals, as well as 95.3 billion meticals in advances at the Bank of Mozambique.

The report also adds that Mozambique’s international reserves ‘remain at comfortable levels’, with an accumulated balance of around 3.7 billion dollars, enough to cover around five months of imports of goods and services, excluding major projects.

In April, the Ministry of Economy and Finance (MEF) warned in a report that maintaining the pace of growth in domestic debt could threaten the reversal process and make it unsustainable ‘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 by 2029 at 50 per cent domestic/50 per cent external, with a portfolio dominated by purely commercial instruments, a scenario that would jeopardise the chances of reversing the unsustainable debt situation in this generation,’ said the institution.

At the time, the MEF explained that, as interest rates on Treasury Bills (BT, 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.

‘Having risen from 5 per cent in 2021 to 5.8 per cent in 2022 and now 6.5 per cent in 2023, totalling a cumulative increase of 150 basis points in two years, the refinancing risk, reflected in the growing concentration of public debt maturities in the short-term horizon, represents the greatest vulnerability,’ the document reads.

According to the entity, Mozambique’s domestic debt, accumulated until 31 December 2023, amounted to the equivalent of 4.9 billion dollars (309.6 billion meticals). 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.

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