Mozambique has exchanged an internal debt issuance from 2021 for a new one valued at approximately 52.9 million euros, marking the first operation of 2024. The total demand was 3.744 billion meticais, with a notable growth in debt and interest charges. Growing domestic debt poses sustainability risks that require careful management.
On Tuesday, the Mozambican state executed an exchange involving an internal debt issuance from 2021, for a new issuance totaling over 3.694 billion meticais (approximately 52.9 million euros). This operation marks the first of the year and was reported by the Mozambique Stock Exchange (BVM). The maximum limit for this internal debt exchange was set at 5.2 billion meticais (about 74.5 million euros), indicating that the operation did not reach this threshold.
According to BVM data, the total demand for the issuance from specialized operators in Treasury Bonds was 3.744 billion meticais (around 54.1 million euros), illustrating a demand and supply ratio of 72%. The allocation totalled 3,694,208,500 meticais (52.9 million euros), accounting for 98.66% of the total demand and included the exchange of Treasury Bonds from the third series of 2021 to the first series of 2025, plus an allocation of 50 million meticais (approximately 716.6 thousand euros) in new allocations.
This was the inaugural Treasury Operations (OT) issuance conducted by Mozambique in 2024. Lusa has reported that the interest charges on Mozambique’s debt have surged by 12% in 2024, amounting to 57.608 billion meticais (857.4 million euros), which is up from 49.929 billion meticais (743 million euros) spent in 2023. Notably, the interest on domestic debt alone rose by 13% in 2024, exceeding 45.691 billion meticais (680 million euros).
Mozambique’s public debt stock has surpassed one billion meticais (approximately 15.8 billion euros) in 2024, indicating a 9% increase within a year. Data shows that the total domestic and external debts as of December 31, 2024, reached 407.085 billion meticais (6.139 billion euros) and 636.548 billion meticais (9.600 billion euros), respectively.
The external debt experienced a 1.4% increase, while internal debt soared by 21.8%, mainly due to the issuance of short-term Treasury Bills, estimated at 46.162.9 billion meticais (696.2 million euros). The Ministry of Economy and Finance’s 2023 public debt report expressed concern regarding the rapid growth in domestic debt, cautioning that if this trend continues, it may lead to a balanced stock of 50% domestic and 50% foreign by 2029. Such a shift presents a challenging environment for reversing the current unsustainability of the debt situation.
The report also highlighted increasing interest rates for Treasury Bills and Operations, which have raised the cost of domestic financing and led to a continuous increase in the average interest rate of the government’s loan portfolio. The cumulative interest rate hike has reached 150 basis points over the two years from 2021 to 2023, escalating from 5% to 6.5%. Additionally, the report cautioned about refinancing risks emerging from a growing concentration of public debt maturities in the short term, posing significant vulnerabilities to financial sustainability.
In summary, Mozambique has initiated the first Treasury Operations issuance of 2024, exchanging an internal debt for new issuance totaling 3.694 billion meticais. While the demand for this issuance was significant, concerns mount over the rapid growth in both domestic and public debt, alongside rising interest rates. These factors necessitate vigilance to avert potential risks to the country’s fiscal sustainability.
Original Source: clubofmozambique.com
