Bank of Mozambique says the country’s internal debt is high

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Bank of Mozambique says the country’s internal debt is high

3:46 CAT | 27 Oct 2017

The governor of the Bank of Mozambique, Rogério Zandamela, yesterday said that the country’s internal debt, estimated at 100.5 billion meticais, is high, referring a solution on debt sustainability to market dynamics

“On the issue of domestic debt, it is high,” Rogério Zandamela said, setting public indebtedness at 100.5 billion meticals (around EUR 1.41 billion), compared with 97.7 billion meticais in August.

Domestic debt behaviour, he continued, has been influenced by the state’s growing recourse to treasury bills to finance itself in the face of international partners’ cuts in state budget aid.

“This indebtedness shows, in part, the difficulties that the public sector has been facing in mobilising resources to finance its expenditures, in a context in which the resumption of direct external support to the State Budget cannot be foreseen in the short and medium term, which reflects the prevalence of a high fiscal risk,” Zandamela said.

Asked about the sustainability of recourse to domestic debt by the state, the governor of the Bank of Mozambique referred the solution to market dynamics.

“Ultimately, it is the market that decides, because it is the market that buys this debt,” and it would be the market itself that signalled it had reached unsustainable levels, he added.

Since the bulk of the domestic debt is made up of treasury bills, he continued, it would be up to the holders of these bills to decide whether or not to continue to hold this type of investment.

“It would not be credible to say that when we are at this level, we are [in a] bad [situation],” he said.