Mozambique Conducts Internal Debt Exchange Amid Rising Public Debt Concerns
The Mozambican state has exchanged internal debt valued at 52.9 million euros for a new issue. The operation, which met 98.66% of demand, reflects increasing interest charges and overall public debt growth. Concerns about the sustainability of domestic debt continue to emerge, emphasizing the need for vigilant fiscal management.
On Tuesday, the Mozambican government conducted an exchange of internal debt from 2021 for a new issuance, amounting to over 3.694 billion meticais (approximately 52.9 million euros). This exchange represents the initial operation of the year, as reported by Lusa.
The Mozambique Stock Exchange (BVM) indicated that the maximum limit for the internal debt exchange was set at 5.2 billion meticais (about 74.5 million euros), but the operation did not reach this threshold. Overall demand for the debt issuance reached 3.744 billion meticais (nearly 54.1 million euros), demonstrating a demand and supply ratio of 72%. Of this, 71.04% pertained to Treasury Bonds exchanges, while the remaining 0.96% consisted of new allocations.
The BVM explained that the allocated amount represented 98.66% of the total demand, translating to 3.694 billion meticais for the exchange of Treasury Bonds from the third series of 2021 to the first series of 2025, along with 50 million meticais (about 716.6 thousand euros) in new allocations.
In a related report, Lusa indicated a 12% increase in Mozambique’s debt interest payments for 2024, reaching 57.608 billion meticais (857.4 million euros). This figure marks a rise compared to the 49.929 billion meticais (743 million euros) incurred in 2023. Notably, interest payments on domestic debt alone increased by 13% this year, totaling over 45.691 billion meticais (680 million euros).
The country’s public debt stock surpassed one billion meticais (15.8 billion euros) in 2024, reflecting a 9% year-on-year growth. According to the latest budget execution report, by December 31, domestic debt reached over 407.085 billion meticais (6.139 billion euros), while external debt amounted to over 636.548 billion meticais (9.6 billion euros).
The report highlighted that external debt grew by 1.4% in 2024 and internal debt expanded by 21.8%, mainly due to the issuance of short-term Treasury Bills totaling 46.163 billion meticais (696.2 million euros). The Ministry of Economy and Finance had previously cautioned about the rapid growth of domestic debt, raising concerns about sustainability.
It stated, “If domestic debt continues to grow at the current rate over the next five years… a scenario that would compromise the possibilities of reversing the debt’s unsustainability in this generation.” Additionally, the report noted rising interest rates on Treasury Bills and Treasury Operations, leading to increased costs of domestic financing and a cumulative rise in the weighted average interest rate from 5% in 2021 to 6.5% in 2023. The concentration of public debt maturities in the short term has been flagged as a primary risk.
The Mozambican government successfully exchanged an internal debt issue for a new issuance, valuing approximately 52.9 million euros, although it fell short of the maximum limit. Rising interest charges and significant growth in public debt, especially domestic debt, pose challenges for fiscal sustainability. These factors highlight the potential risks if current debt growth trends continue, thereby increasing the urgency for effective management strategies moving forward.
Original Source: clubofmozambique.com
