Mozambique: Foreign debt service increased almost 20% in 2023 to $654.2 million

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Mozambique: Foreign debt service increased almost 20% in 2023 to $654.2 million

6:16 CAT | 29 Apr 2024

FILE - For illustration purposes only. [File photo: TVM]

Mozambique spent $654.2 million(€611.5 million) on servicing its external public debt in 2023, up almost 20% in a year, according to data from the Ministry of Economy and Finance to which Lusa had access on Friday.

According to the report on public debt in 2023, state spending on servicing external debt last year was split between $487.72 million(€456 million) for amortisation and $166.48 million (€155.6 million) in interest.

The total external debt service in 2023, amortised principal and interest, was the highest in the history provided in the report, compared to $545.7 million (€510.1 million) in 2022 (+19.9%), $517.4 million (€483.6 million) in 2021, $475.2 million in 2020 (€444.2 million) and $321 million (€300 million) in 2019.

‘As in the previous financial year, the net movement of foreign currency in public debt operations was once again negative, i.e. the government paid more to creditors (in principal and interest) than it received (in new disbursements). This is due to the fact that most of the projects in the portfolio have closed their respective disbursement periods (having entered the repayment phase) at a time when the current policy of restricting external indebtedness restricts the entry of new projects into the government’s credit portfolio,’ according to the document.

The report adds that the flow of external debt movements in 2023 ‘also reflects the effect of the incorporation into the debt service of the payment made following the multilateral out-of-court agreement reached between the Mozambican state and a group of 14 creditor entities of the now defunct Proindicus,’ in the case of the hidden debts on trial in London, involving ten foreign financial institutions and four domestic commercial banks.

‘Under the agreement in question, and following the respective approval by the cabinet and subsequent verification of legality (legal opinion by the Attorney General’s Office and approval by the Administrative Court), the state paid the sum of $46.36 million [€43.4 million ] in favour of the ten foreign institutions concerned,’ it said.

According to previous figures from the Mozambican government, the cost of servicing all of Mozambique’s debt — including domestic debt — will grow by 18% in 2024, to more than 116,631 billion meticais (1.702 billion).

According to the documents supporting the Economic and Social Plan and State Budget (PESOE) for 2024, the cost of servicing

Mozambique’s debt – interest payments and principal repayments – is estimated to be equivalent next year to 7.6% of the Gross Domestic Product (GDP) estimated for this year.

‘The acceleration in capital amortisation is related to the framework of the External Debt Restructuring Agreement, with maturities to be verified in 2024. In addition, a change in the external debt interest rate is expected for bonds maturing in 2024,’ the document reads.

As a result, more than half of the cost of servicing Mozambique’s public debt this year will be capital repayments, amounting to 60.915 billion meticais (€889 million) and 55.716 billion meticais (€813.2 million) in interest payments. Of this, 41.430 billion meticais (€604.7 million) relates to domestically issued debt through bonds and treasury bills.

In November, the governor of the Bank of Mozambique recognised ‘the strong pressure on public spending’ in the country, ‘in a context of weak revenue collection and limited sources of external financing’, which ‘is contributing to an increase in fiscal risk and domestic indebtedness’.

Source: Lusa