As reported on 7 March, on Tuesday 11 March the state exchanged a 2021 domestic debt issue for a new one, totalling more than 3.6 billion meticals (56.6 million dollars), in the first operation of the year, according to information consulted this Wednesday (12) by Lusa.
According to the Mozambique Stock Exchange (BVM), the maximum limit for this exchange of internal debt was 5.2 billion meticals (79.7 million dollars), so the operation did not reach that amount.
According to BVM, ‘the overall demand for the issue’ in the bids submitted by the Specialised Treasury Bond Operators was 3.7 billion meticals (around 57.9 million dollars), with a demand and supply ratio of 72%, including 71.04% as part of the demand for the exchange of Treasury Bonds (OT) and 0.96% in new allocations.
‘Having allocated the total demand, the value of the issue corresponded to 3.6 billion meticals (56.6 million dollars), equivalent to 98.66 per cent of the total, for the exchange of 2021 OT and 50 million meticals (734,000 dollars) in new allocations,’ explains BVM.
The organisation reports that this was the first OT issue made by the Executive this year.
Lusa reported this month that interest costs on the country’s debt grew by 12 per cent in 2024, compared to the previous year, to 57.6 billion meticals (61.7 million dollars).
According to data from the Ministry of Finance, this amount compares with the 49.9 billion meticals (around 53.4 million dollars) that the state spent on the so-called debt burden in 2023.
The interest payment component of the domestic debt alone grew by 13 per cent in 2024, to more than 45.6 million meticals (approximately 48.8 million dollars), while the state spent almost 11.3 billion meticals (12 million dollars) on interest on the external debt, an increase of 9.5 per cent in the space of a year.
The country’s public debt stock exceeded one billion meticals (1.68 billion dollars) in 2024, an increase of 9 per cent in one year.
According to the information on last year’s budget execution, the state’s debt grew from January to December to almost one trillion meticals.
On 31 December the domestic debt reached more than 407 billion meticals (434.5 million dollars), while the external debt exceeded 636.5 million meticals (681.5 million dollars).
According to the document, external debt rose by 1.4 per cent in 2024, while domestic debt increased by 21.8 per cent, ‘mainly due to the issue of short-term debt through Treasury Bills, worth 46.1 billion meticals (49.3 million dollars)’.
In April last year, the 2023 public debt report by the now defunct Ministry of Economy and Finance warned of the rate of growth of domestic debt, which, if it continues, threatens the process of reversing its unsustainability.
‘If domestic debt continues to grow at the current rate over the next five years, the breakdown of the ‘stock’ could, by 2029, balance out 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 unsustainability of the debt in this generation,’ said the document.
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 in 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,’ added the report, which also warned that the ’refinancing risk, reflected in the growing concentration of public debt maturities in the short-term horizon, represents the greatest vulnerability.’
