Mozambique: Domestic public debt equal to 28.7% GDP in March, new record

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Mozambique: Domestic public debt equal to 28.7% GDP in March, new record

11:27 CAT | 08 Apr 2025

File photo: Lusa

Mozambique’s domestically issued public debt hit new highs in March, at 447.227 billion meticais (€6.315 billion), equivalent to 28.7% of Gross Domestic Product (GDP), according to central bank data consulted on Tuesday by Lusa.

According to the Bank of Mozambique’s most recent Economic Situation and Inflation Outlook Report, this domestic debt stock compares with a total of 415.556 billion meticais in December, equivalent to 29.5% of GDP (estimated for 2024).

This is an increase of 7.6% in three months, corresponding to an extra 31.671 billion meticais ( €447 million), just in the issue of Treasury Bills, short-term domestic debt and advances from the central bank, while the stock of Treasury Bonds fell by 7.108 billion meticais (€100 million) in the last year, essentially because no new issues were made since December.

The central bank’s advances to the state currently total 125.441 billion meticais (€1.769 billion), according to the same report.

“The pressure on domestic public debt continues to get worse,” the central bank warned on 26 March in its report on the Monetary Policy Committee (CPMO) meeting.

The Bank of Mozambique’s warning coincided with the decision, two days earlier, by financial rating agency Standard & Poor’s (S&P), which downgraded the country’s domestic public debt issues to Partial Default, due to delays in payments to creditors and changes to a debt issue.

“This means that we are left with an almost speculative debt instrument. If it’s speculative, few investors will want that security, that instrument, in their portfolio,” noted the governor of the Bank of Mozambique, Rogério Zandamela, at the same time.

“It undermines investor confidence. This has implications for access to external credit for families, companies and the state,” he added, emphasising the possibility that some investors might want to “get rid” of the Mozambican debt securities in which they have invested.

The minister of finance, Carla Loveira, also clarified that the domestic debt exchange auctions that have been held are provided for in the current public debt management strategy.

“We have some Treasury Bills that were issued in the past, where their term was due to expire this year. It would be up to the government to decide whether to simply close them, pay them off or renew them. The strategy that is in place at the moment, until 2025, provides for what we call exchange auctions,” said the minister.

She insisted that the exchange auctions are part of the current debt management strategy (2022-2025), which will be reviewed by the new government, sworn in in January, for the period 2026 to 2029.

“We are also working with our consultants on public debt (…), coming from the World Bank, the International Monetary Fund, among other organisations that also provide support on matters relating to our country’s debt,” said Carla Loveira.

S&P, meanwhile, described Mozambique as having “exchanged 3.7 billion meticais [€50 million] in local currency debt, maturing in March 2025, for bonds with a longer maturity and lower interest rates, maturing in March 2030”, pointing out that “the continued use of these liability management operations, coupled with a history of delays in domestic debt payments, reflects Mozambique’s fiscal and liquidity constraints”.

Meanwhile, financial rating agency Moody’s downgraded Mozambique’s long-term domestic debt issues to Caa3, three levels ahead of financial default due to late payments and the debt swap.

The revision, Moody’s explained on 4 April, “reflects the government’s serious liquidity problems”, which are “mainly due to debt refinancing difficulties and budgetary pressures, which have been further aggravated by the political and social unrest that followed the general elections in early October”.

Source: Lusa