Govt has contracted a further 7.5 billion meticais in Domestic Public Debt, with PES and state budget still not approved – A Verdade

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Govt has contracted a further 7.5 billion meticais in Domestic Public Debt, with PES and state budget still not approved – A Verdade

1:29 CAT | 11 Mar 2020

Picture: A Verdade

The Economic and Social Plan and State Budget for 2020 have not yet been submitted to the Assembly of the Republic, but the Government is already issuing Internal Public Debt again.

@Verdade has found that, during the month of February, Treasury Bonds were issued in the amount of 4.5 billion meticais, and on Tuesday (10), the Executive tried to sell another 3 billion meticais in Securities on the Securities Stock Exchange.

The cost of amortising domestic debt in 2019 was twice as much as the investment in Education, six times more than was spent on Health, ten times more than spent on Agriculture and Rural Development.

Formally, the government’s 2020 financial year will only start when its proposal for an Economic and Social Plan (PES) and the State Budget (OE) are approved by the Assembly of the Republic. Among numerous actions and activities, the budget law will define the amounts of public debt that may be contracted up until December.

However, before knowing what the OE deficit will be, and anticipating the “Casa do Povo”, the Minister of Economy and Finance has already decreed that during this financial year Mozambicans will be indebted by at least 19,447,307,870 meticais. Furthermore, the government has in the meantime started to realise this debt by issuing two series of Treasury Bonds during the month of February.

“Under the terms of paragraph b) of no. 1 of article 96 of the Securities Market Code, approved by Decree Law no. 4/2009 of 24 July, a public meeting was held on 11 February 2020, at 3:00 p.m., on the premises of the Mozambique Stock Exchange, a Special Stock Exchange Session aimed at calculating the results of the 2020 Treasury Bonds Issuance – 1st Series. In accordance with the proposals submitted by the Specialised Operators in Treasury Bonds, the global demand for the Issuance was MZN 2,000,000,000.00, with the demand-to-offer ratio being 380.60 percent and the respective interest rates at between 11,250 percent and 15.00 percent. The issuance amount was 2 billion MZN,” @Verdade has learned.

“On February 25, 2020, a new “Special Stock Exchange Session was held to calculate the results of the 2020 Treasury Bonds Issuance – 2nd Series. According to the proposals submitted by Specialised Treasury Bond Operators, the global demand for the Issuance was MZN 9,224,000,000.00, with the demand-to-offer ratio being 368.96 percent and the respective interest rates were between 10.00 percent and 14.00 percent. The issuance amounted to 2.5 billion meticais.”

In 3 months, Government increases Internal Public Debt by 7.5 billion meticais

Data from the Bank of Mozambique at the end of February indicate that, with these two issuances of Treasury Bonds, Mozambique’s Internal Public Debt “increased from 140 billion meticais to 145.6 billion meticais, essentially reflecting the use of Treasury Bills by the State and the issuance of Treasury Bonds. The above amounts do not take into account other values of domestic public debt, such as loans and leasing contracts, as well as liabilities in arrears,” the Bank of Mozambique’s Monetary Policy Committee statement reads.

@Verdade meanwhile established on Tuesday (10) that the Government placed on the market a 3rd Series of Treasury Bonds of 2020, in order to obtain an additional 3 billion meticais at an interest rate of 12 percent.

It may be remembered that @Verdade has previously reported that, between 2015 and 2019, Mozambique’s stock of Domestic Public Debt rose from 69.2 million to 154.9 billion meticais.

Last year, the Executive amortised some of this domestic debt. Between interest and repayments, this amounted to 129.3 billion meticais, an unprecedented amount equivalent to all the money that the Government had invested in sectors considered priority. It was more than double the 61 billion invested in Education last year, six times more than was spent on Health, ten times more than thatspent on Agriculture and Rural Development and more than 32 times the little more than 4 billion meticais invested in supplying Mozambicans with safe drinking water.

By Adérito Caldeira

Source: A Verdade