Interest cost of Mozambique’s debt grows 12% in one year to 857.4 ME

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Interest cost of Mozambique’s debt grows 12% in one year to 857.4 ME

12:35 CAT | 05 Mar 2025

FILE - For illustration purposes only. [File photo: Broker News]

Interest charges on Mozambique’s debt grew 12% in 2024 to 57.608 billion meticais (€857.4 million), according to official figures accessed by Lusa today.

According to the same source, this amount compares with the 49,929 million meticais (€743 million) that the state spent servicing the debt burden in 2023. The interest payment component of the domestic debt alone grew 13% in 2024, to more than 45,691 million meticais (€680 million), while on interest on the external debt the state spent almost 11,395 million meticais (€177.6 million), up 9.5% in the space of a year. Lusa reported this week that Mozambique’s public debt stock exceeded one billion meticais (€15.8 billion) in 2024, an increase of 9% in one year.

According to information on budget execution, the Mozambican state’s debt grew from January to December 2024 to almost 1.069 billion (million million) meticais.

The domestic debt stock alone reached more than 407,085 million meticais (€6,139 million) on 31 December, while the external debt stock exceeded 636,548 million meticais (€9,600 million).

According to the document, external debt registered an increase of 1.4% in 2024, “mainly due to the adjustment of data associated with the migration to the new debt management system” known as ‘Meridian’. “On the other hand, domestic debt increased by 21.8%, mainly due to the issuance of short- term debt through Treasury Bills worth 46,162.9 million meticais [€696.2 million], and within the scope of the Credit Facility with the central bank, worth 28,100 million meticais [€423.8 million],” the document reads.

The Mozambican Ministry of Economy and Finance’s 2023 public debt report warned in April last year about the pace of growth in domestic debt, which, if maintained, threatens the possibility of reversing its unsustainability.

“If domestic debt continues to grow at the current rate over the next five years, the distribution of the stock could balance out at 50% domestic/50% foreign by 2029, with a portfolio dominated by purely commercial instruments, a scenario that would compromise the possibilities of reversing the debt’s unsustainability in this generation,” the document said.

As interest rates on Treasury Bills (BT, short maturities) and Treasury Operations (OT, longer maturities) “have increased, the cost of domestic financing has driven a continuous upward adjustment in the weighted average interest rate on the government’s loan portfolio.”

The rate went from “5% in 2021 to 5.8% in 2022 and now 6.5% in 2023, totalling a cumulative increase of 150 basis points in two years,” the report notes, warning that the “refinancing risk, reflected in the growing concentration of maturities” of public debt “in the short term, represents the greatest vulnerability”.

Source: Lusa