The financial rating agency Standard & Poor’s (S&P) warned today that Mozambique will face ‘large payments’ of domestic debt over the next two years, totalling around one billion euros, which poses significant economic challenges.
‘These are very large maturities,’ said the deputy director of S&P’s sovereign ratings department in an interview with the Bloomberg financial information agency, referring to the domestic debt payments that Mozambique will have to bear in 2025 and 2026, years in which it will have to pay 38 and 34 billion meticals, respectively, which are equivalent to 545 and 480 million euros, respectively.
‘This is something that will pose potential challenges and the need for political compromises for the government,’ added Leon Bezuidenhout in his interview with Bloomberg, in which he said that, even so, “the local financial system still has the capacity to absorb additional issues”, despite interest rates being “extremely high”.
The increase in domestic public debt came about as a result of Mozambique’s withdrawal from the international financial markets following the hidden debt scandal, in which huge loans taken out without parliamentary approval and without informing international donors were discovered, forcing the country to resort to domestic debt to finance public spending.
On the other hand, this increase in debt was also the result of a government programme designed to simplify spending on civil servants, but it had the opposite effect, leading to warnings from the IMF, writes Bloomberg.
In addition to the amount of domestic debt payments, the country is also facing rising interest on foreign debt, particularly Eurobonds (debt securities in non-national currency), the interest on which has almost doubled since this year.
‘The government has already started paying the coupon on the Eurobond maturing in 2031, which was previously 5 per cent, equivalent to 47 million dollars (44.1 million euros) a year, and has risen to 9 per cent, or 81 million dollars (76 million euros, from 2023 to 2028, continuing to rise to 225 million dollars (211 million euros) per year between 2028 and 2031,’ S&P analysts wrote in April, when they decided on the CCC rating, which means non-investment territory, or “junk”, as it is usually referred to.
The International Monetary Fund expects this Lusophone country to grow by around 5% this year, with a public debt rising to 97.5% of GDP, one of the highest in Africa, and which, in practice, prevents the executive from going further into debt due to the ongoing financial adjustment programme, which foresees that 20% of tax revenue will be channelled into servicing the debt.
Lusa
