Mozambique’s Debt Interest Costs Surge 12% in 2024

In 2024, Mozambique’s debt interest expenses rose by 12% to 57.608 billion meticais (€857.4 million), compared to 49,929 million meticais (€743 million) in 2023. Domestic debt interest grew by 13%, whereas external debt interest increased by 9.5%. Total public debt exceeded one billion meticais (€15.8 billion), highlighting potential unsustainability in future years if current growth trends continue.

Mozambique’s interest costs for its debt increased by 12% in 2024, reaching 57.608 billion meticais (€857.4 million). This rise is significant compared to the previous year’s interest expenditure of 49,929 million meticais (€743 million). Specifically, interest payments on domestic debt rose by 13% to over 45,691 million meticais (€680 million), while external debt interest increased by 9.5%, totaling nearly 11,395 million meticais (€177.6 million).

The public debt stock of Mozambique surpassed one billion meticais (€15.8 billion) in 2024, reflecting a 9% increase from the previous year. By the end of December 2024, the overall debt had grown to approximately 1.069 billion (million million) meticais, with domestic debt alone exceeding 407,085 million meticais (€6,139 million) and external debt surpassing 636,548 million meticais (€9,600 million).

The rise in external debt was noted at 1.4% in 2024, largely attributed to adjustments linked to the adoption of a new debt management system named ‘Meridian’. On the other hand, the domestic debt saw a more substantial increase of 21.8%, driven by the issuance of short-term Treasury Bills valued at 46,162.9 million meticais (€696.2 million) and the Credit Facility with the central bank worth 28,100 million meticais (€423.8 million).

Warnings regarding domestic debt growth were highlighted in the 2023 public debt report by the Ministry of Economy and Finance, indicating potential unsustainability if the current growth rates persist. The report stated that if trends continue, the distribution may balance to 50% domestic and 50% foreign by 2029, which could hinder efforts to manage debt sustainability.

Further, the report indicated that the increasing interest rates on Treasury Bills and Operations have led to a continual rise in the weighted average interest rate of the government’s loan portfolio, escalating from 5% in 2021 to 6.5% in 2023. This cumulative increase of 150 basis points over two years raises concerns regarding refinancing risks and the concentration of public debt maturities in the short term, representing a significant vulnerability.

In summary, Mozambique’s debt interest costs grew significantly in 2024, influenced by both domestic and external factors. The unsustainable pace of domestic debt growth poses risks to the country’s financial stability, as highlighted by the Ministry of Economy and Finance. Additionally, rising interest rates may further complicate the government’s refinancing efforts, emphasizing the need for strategic financial management moving forward.

Original Source: clubofmozambique.com