On Tuesday, 20 August, the state launched a Treasury Bond issue worth 158 million meticals (2.4 million dollars) on the Mozambique Stock Exchange (BVM).
According to information shared this Wednesday (21) by Lusa, the bids submitted by the Specialised Treasury Bond Operators indicate that the ‘demand and supply’ ratio was 269.6%, reaching 612 million meticals (9.4 million dollars).
‘The issue (reopening of the ninth series of 2024) for direct subscription by the Specialised Operators raised an amount below the maximum foreseen in the initial notice, which was 227 million meticals (3.5 million dollars), with an interest rate of 15% and a maturity of five years,’ he said.
On 6 August, Mozambique placed 125 million meticals in a Treasury Bond issue, with demand exceeding supply by five times. The bids presented at the time by the Specialised Treasury Bond Operators indicated that the ‘demand and supply’ ratio was 270.17%, reaching 643 million meticals.
Previously published data from the central bank reveals that the domestic public debt issued by Mozambique totalled 364.2 billion meticals, after growing by the equivalent of more than 51.4 billion in five months of 2024.
According to the Economic Situation and Inflation Outlook report for May, the domestic public debt contracted between December 2023 and May of this year, excluding that resulting from loan contracts, leases and overdue liabilities, ‘increased by around 51.9 billion meticals’ by the end of May.
Overall, the debt issued domestically represented the equivalent of 23.7% of the Gross Domestic Product (GDP) on the same date, consisting essentially of Treasury Bills, with a ‘stock’ on 28 May of 99.8 billion meticals, and Treasury Bonds totalling 169 billion, as well as 95.3 billion meticals in advances at the Bank of Mozambique.
In April, the Ministry of Economy and Finance’s 2023 public debt report 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 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.’
‘The issue (reopening of the ninth series of 2024) for direct subscription by Specialised Operators raised an amount below the maximum foreseen in the initial notice, which was 227 million meticals (3.5 million dollars), with an interest rate of 15% and a maturity of five years’
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 public debt maturities on the short-term horizon, represents the greatest vulnerability”.
The accumulated domestic debt up to 31 December 2023 amounted to the equivalent of 309.6 million meticals (4.9 billion dollars). The weight of BT issues in the total stock rose from 4 per cent in 2019 to 9 per cent in 2023, while OT doubled to 16 per cent in the same period.
