On Tuesday, the Mozambican state will try to place on the market an issue of up to 227 million meticals (3.2 million euros) in Treasury Bonds (OT), through a stock exchange operation, it was announced today.
The operation, according to a notice from the Mozambique Stock Exchange (BVM) consulted by Lusa, consists of the first reopening of the ninth series of 2024 Treasury Bonds, held on August 6, and is intended for direct subscription by Specialised Operators.
The issue will have a fixed nominal interest rate of 15.00% during the first four half-yearly payments and a variable rate during the last six half-yearly payments, as well as a maturity of five years.
On 6 August Mozambique placed 125 million meticals (1.8 million euros) in a Treasury Bond issue, with demand exceeding supply by five times, according to previous information from BVM.
The bids submitted by the Specialised Treasury Bond Operators indicate that the demand and supply ratio was 270.17%, reaching 643 million meticals (9.2 million euros).
The issue (ninth series of 2024), directly subscribed by the Specialised Operators, at the time raised a value below the maximum foreseen in the initial notice, which was 238 million meticals (3.4 million euros), with a maturity of five years.
The domestic public debt issued by Mozambique totalled 364,251 million meticals (5,213 million euros), after growing by the equivalent of more than 740 million euros in five months of 2024, according to central bank data previously published by Lusa.
According to the Economic Situation and Inflation Outlook report for May, domestic public debt contracted between December 2023 and May of this year, excluding that resulting from loan contracts, leases and outstanding liabilities, ‘increased by around 51,910 million meticals’, equivalent to 743 million euros, by the end of May.
Overall, domestically issued debt at the same date represented the equivalent of 23.7 per cent of Mozambique’s Gross Domestic Product (GDP), and was essentially made up of Treasury Bills, with a stock on 28 May of 99,853 million meticals (1,429 million euros), and Treasury Bonds, which totalled 169,089 million meticals (2,420 million euros), as well as 95,309 million meticals (1,364 million euros) in advances at the Bank of Mozambique.
In April, the 2023 public debt report by the Mozambican Ministry of Economy and Finance warned of the pace 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 balance out at 50 per cent domestic/50 per cent external by 2029, 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.’
As the 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’.
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,’ says the report, which also warns that the ‘refinancing risk, reflected in the growing concentration of maturities’ of public debt ‘in the short term horizon, represents the greatest vulnerability’.
The accumulated domestic debt up to 31 December 2023 amounted to the equivalent of 4,911.3 million dollars (4,616 million euros). The weight of BT issues in the total stock rose from 4 per cent in 2019 to 9 per cent in 2023, while that of OT doubled to 16 per cent in the same period.
