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Stock Exchange: ‘Mozambique Issues $20M in Treasury Bonds’

Stock Exchange: ‘Mozambique Issues $20M in Treasury Bonds’

Mozambique raised 1.2 billion meticals (20 million dollars) in an internal issue of Treasury Bonds with a maturity of five years, carried out through the Mozambique Stock Exchange (BVM), according to Lusa.

The data released by the BVM shows that the operation took place on 10 December and registered a demand to supply ratio of 42.21 percent, with total demand reaching 1.7 million meticals.

The issue, corresponding to the 13th series of 2024, was made through direct subscription by operators specialising in Treasury Bonds. The amount authorised for placement was up to 4.2 million meticals, with a nominal interest rate of 13.5% for the first four six-monthly payments, becoming variable in the last six payments.

This operation is part of a context of the state’s growing internal indebtedness. According to the Bank of Mozambique, domestic public indebtedness has accumulated an increase of 95.7 billion meticals since the beginning of 2024, bringing the total to 408.1 billion meticals in November.

The central bank pointed out that the weight of domestic debt in Gross Domestic Product (GDP) rose from 18.1 per cent in December 2020 to 26.5 per cent in November this year. Still according to the institution, the rate of growth of domestic debt remains a significant concern.

A report by the Ministry of Economy and Finance, released in April, warned that if the current rate of growth persists, by 2029 public debt could reach an even split of 50 per cent between domestic and foreign debt. Such a scenario, dominated by commercial instruments, could jeopardise efforts to achieve public debt sustainability.

At the same time, the average cost of domestic financing has been increasing due to the rising interest rates associated with Treasury Bills and Treasury Bonds. The weighted average interest rate on the government loan portfolio rose from 5 per cent in 2021 to 6.5 per cent in 2023, accumulating an increase of 150 basis points in two years.

The accumulated domestic debt by the end of 2023 totalled 309.4 billion meticals, with the weight of Treasury Bills in the total rising from 4% in 2019 to 9% in 2023, while Treasury Bonds doubled to 16%.

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The issue reflects the government’s efforts to mobilise resources in the domestic market, while maintaining the challenge of managing the balance between financing costs and the sustainability of public debt.

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