Mozambique exchanges equivalent to 52.9 ME of 2021 internal debt for new issuance

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Mozambique exchanges equivalent to 52.9 ME of 2021 internal debt for new issuance

10:37 CAT | 12 Mar 2025

File photo: RM

The Mozambican state on Tuesday exchanged an internal issue from 2021 for a new one, totaling more than 3,694 million meticais (52.9 million euros), in the first operation of the year, according to information consulted today by Lusa.

According to information from the Mozambique Stock Exchange (BVM), the maximum limit for this internal debt exchange was 5.2 billion meticais (74.5 million euros), so the operation did not reach this value.

According to the BVM, “the overall demand for the issue” in the proposals presented by the Specialized Operators in Treasury Bonds was 3,744.2 million meticais (54.1 million euros), with a demand and supply ratio of 72%, including 71.04% within the scope of the demand for exchange of Treasury Bonds (OT) and 0.96% in new allocations.

“Having been allocated the total demand”, explains BVM, the value of the issue corresponded to 3,694,208,500 meticais (52.9 million euros), equivalent to 98.66% of the total, for the exchange of 2021 OT – third series for 2025 OT – first series, and 50 million meticais (716.6 thousand euros) in new allocations.

This was the first OT issuance made by Mozambique this year.

Lusa reported this month that interest charges on Mozambique’s debt grew 12% in 2024, compared to the previous year, to 57.608 billion meticais (857.4 million euros).

According to data from the Ministry of Finance, this amount compares with the 49,929 million meticais (743 million euros) that the State spent on the so-called 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 euros), while on interest on the external debt the State spent almost 11,395 million meticais (177.6 million euros), up 9.5% in the space of a year.

Mozambique’s public debt stock exceeded one billion meticais (15.8 billion euros) in 2024, an increase of 9% in one year.

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

On December 31, domestic debt reached more than 407,085 million meticais (6,139 million euros), while external debt exceeded 636,548 million meticais (9,600 million euros).

According to the document, external debt registered an increase of 1.4% in 2024, while internal 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 euros).

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 process 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 been driving a continuous upward adjustment of the weighted average interest rate on the government’s loan portfolio,” it added.

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

Source: Lusa