Mozambique: Domestic debt service to peak at 20 billion meticais in September

Login

Register

http://www.clubofmozambique.com/

Mozambique: Domestic debt service to peak at 20 billion meticais in September

12:52 CAT | 31 Jul 2025

File photo: DW

The Mozambican government warns of a “very large impact” on domestic public debt service in the event of interest rate fluctuations, given the increase in the debt stock, and expects to spend 20 billion meticais on domestic public debt service in September alone.

“Given the increase in the domestic debt stock in recent years, an interest rate shock will have a very large impact on domestic debt service,” states the Medium-Term Fiscal Scenario (CFMP) from 2026 to 2028, a document consulted by Lusa.

It adds that current data shows “a concentration of payments in specific periods, which could put pressure on the public treasury, requiring constant monitoring throughout the period”.

The report even states that in September, “expected payments for amortization and interest total approximately 20 billion meticais [€267.2 million]”, making this “the largest amount to be disbursed throughout the year” [2025].

“This scenario poses a risk as it reflects the growing dependence on domestic debt, the servicing of which has become a substantial burden on public spending, coupled with limited access to external credit and the growing need to finance the budget deficit, thus intensifying pressures on public finances,” the document states.

The Bank of Mozambique acknowledged on May 30 that systemic risk in the country’s banking system is “moderate”, but warns of “increased exposure” to domestic public debt.

“The systemic risk, which assesses the potential contagion effect resulting from disruptions in the banking system, is moderate. This assessment reflects the reduction in interest rates and the level of non-performing loans in the market, despite the increased exposure of the banking sector to public debt,” reads the central bank’s statement on the last meeting of the central bank’s Monetary Policy Committee (CPMO), held that day.

“Indeed, domestic public debt, excluding loan and lease agreements and overdue liabilities, stands at 445.9 billion meticais [€6.155 billion], representing an increase of 30.3 billion [€418 million meticais] compared to December 2024,” the central bank warned in the same statement.

Lusa reported in May that the refinancing of Mozambican short-term domestic debt issues cost 19.211 billion meticais (€264 million) in the first three months of the year, but the Ministry of Finance doubts the effectiveness of the measure.

According to data from a Ministry of Finance’s report on the evolution of public debt from January to March, compared to December 2024, this represents an 8.9% increase in the stock, corresponding to an additional 36.223 billion meticais (€498.1 million), influenced by the refinancing of short-term debt.

“Although this is a liability management operation aimed at mitigating refinancing risks and improving debt service predictability, its effects have proven adverse due to refinancing under more onerous terms and conditions, contributing to the increase in the debt stock and raising concerns about the effectiveness of the adopted strategy and its sustainability in the medium term,” the report reads.

Furthermore, domestic debt – which closed the first quarter at 443.218 billion meticais (€6.094 billion) – was, the document acknowledges, “aggravated by the issuance of debt in advance under the central bank’s Credit Facility,” amounting to 21.6 billion meticais, representing a 23.8% increase.

“This is a short-term operation with the objective of providing liquidity to the state treasury, the amortization of which should occur by December 31, 2025, and should therefore not have a permanent impact on the stock of domestic debt,” it states.

Source: Lusa