Mozambique exchanged a 2021 internal debt issue for a new issuance worth 52.9 million euros. The operation saw a total demand of 54.1 million euros. Debt interest charges rose 12% in 2024, signaling a 9% increase in total public debt, which raises concerns about sustainability and risks of a potential debt crisis in the coming years.
On Tuesday, the Mozambican government engaged in an internal debt exchange, converting a 2021 issue for a new issuance amounting to over 3.694 billion meticais (52.9 million euros). This initial operation of 2023 did not meet the maximum limit of 5.2 billion meticais (74.5 million euros) set for such exchanges, according to the Mozambique Stock Exchange (BVM).
The BVM reported total demand for this debt exchange reached 3.744 billion meticais (54.1 million euros), resulting in a demand to supply ratio of 72%. This included a significant 71.04% from exchanges of Treasury Bonds (OT) and 0.96% from new allocations. The total allocation met the full demand, converting the 2021 third series OT into the 2025 first series OT, with an additional allocation of 50 million meticais (716.6 thousand euros) in new issues.
In related financial news, Mozambique’s debt interest charges surged by 12% in 2024, totaling 57.608 billion meticais (857.4 million euros), juxtaposed against 49.929 billion meticais (743 million euros) spent in 2023. The interest payments on domestic debt alone rose 13%, amounting to over 45.691 billion meticais (680 million euros). On external debt, almost 11.395 billion meticais (177.6 million euros) was spent, representing an increase of 9.5% within a year.
The country’s public debt surpassed one billion meticais (15.8 billion euros) in 2024, reflecting a 9% annual growth. By December 31, total domestic debt had climbed to over 407.085 billion meticais (6.139 billion euros), while external debt exceeded 636.548 billion meticais (9.600 billion euros). The external debt saw a modest rise of 1.4%, while internal debt surged by 21.8%, largely due to short-term Treasury Bills totaling 46.162 billion meticais (696.2 million euros).
Warnings about rising domestic debt have been issued by the Mozambican Ministry of Economy and Finance. Their 2023 public debt report expressed concern that if domestic debt continues to escalate at the current pace, there could be an equal balance of domestic and external debt by 2029, potentially hindering efforts to rectify existing debt unsustainability.
The report outlined that rising interest rates on Treasury Bills and Operations are inflating financing costs, increasing the weighted average interest rate on government loans from 5% in 2021 to 6.5% in 2023, a 150 basis points surge over two years. Additionally, the document identified refinancing risks due to the growing concentration of maturities in the short term as a significant vulnerability for the fiscal health of Mozambique.
The Mozambican government’s recent internal debt exchange highlights ongoing challenges in managing public finances amidst rising debt levels. The increase in interest charges, especially on domestic debt, poses risks to fiscal sustainability. By 2024, public debt has escalated, necessitating strategic measures to avert a potential debt crisis, with a growing emphasis on balancing domestic and external debt.
Original Source: clubofmozambique.com
