Mozambique’s interest on debt rose 12% in 2024 to €857.4 million, with a significant increase in both domestic and external debt servicing costs. Public debt exceeded €15.8 billion, with forecasts warning of potential unsustainability. The average interest rate for government loans has also increased, highlighting refinancing risks.
In 2024, Mozambique’s interest costs on its national debt increased by 12% to 57.608 billion meticais (€857.4 million). This rise reflects a significant jump from 49.929 billion meticais (€743 million) in 2023 for debt servicing. The domestic portion of the debt experienced a 13% increase, reaching over 45.691 billion meticais (€680 million), while external debt interest payments amounted to around 11.395 billion meticais (€177.6 million), marking a 9.5% rise from the previous year.
Mozambique’s total public debt surpassed one billion meticais (€15.8 billion) in 2024, with a 9% annual increase. The total debt stock grew from January to December 2024, totaling almost 1.069 billion meticais (million million). As of December 31, domestic debt reached over 407.085 billion meticais (€6,139 million) and external debt exceeded 636.548 billion meticais (€9,600 million).
The external debt grew by 1.4% due to adjustments associated with the new debt management system called ‘Meridian’. In contrast, domestic debt surged by 21.8%, largely attributed to issuing 46.162 billion meticais (€696.2 million) in Treasury Bills and 28.1 billion meticais (€423.8 million) from the central bank’s Credit Facility.
A public debt report from the Mozambican Ministry of Economy and Finance in April 2023 warned of the potential unsustainability of rising domestic debt. If trends continue, there could be a 50/50 balance of domestic and foreign debt by 2029, with risks of increased reliance on commercial instruments which may hinder debt sustainability.
The report also highlighted that higher interest rates on Treasury Bills have raised the cost of domestic financing, leading to an increase in the average interest rate on government loans. This rate shifted from 5% in 2021 to 5.8% in 2022, subsequently reaching 6.5% in 2023, showcasing a 150 basis points increase over two years. This situation raises concerns about refinancing risks due to the concentration of debt maturities in the short term.
Mozambique faces significant financial challenges as its interest costs on debt have surged, particularly for domestic loans. The rising debt levels require careful management to avoid potential crises, especially with an increasing proportion of debt maturing in the short term. The government must address these issues to ensure fiscal sustainability going forward.
Original Source: clubofmozambique.com
