Mozambique: Public debt service costs to rise 17% in 2025 – PESOE

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Mozambique: Public debt service costs to rise 17% in 2025 – PESOE

12:08 CAT | 05 May 2025

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

Mozambique’s public debt service costs could rise 17.3% this year to 120.607 million meticais (€1.671 million), according to the budget proposal seen by Lusa today.

According to the proposed Economic and Social Plan and State Budget (PESOE) for 2025, to be analysed today by the specialised committees of the Assembly of the Republic in Maputo starting today, this is equivalent to 7.8% of gross domestic product (GDP), after a decline in debt service – interest and amortisations – in 2024, which then amounted to 108.827 million meticais (€1.508 million euros).

“This amount reflects the government’s commitment to honouring its financial obligations, while implementing a prudent public debt management strategy aimed at ensuring its sustainability in the medium and long term,” the document reads.

In 2023, the cost of Mozambique’s public debt exceeded 108,281 million meticais (€1.5 billion), according to the document, equivalent to 10% of the GDP recorded that year.

The budget proposal, the first prepared by the executive led by Daniel Chapo, sworn in as the fifth President of Mozambique last January, foresees paying off almost 39,240 million meticais (€544 million) abroad this year, in addition to 12,554 million meticais (€174 million) in interest.

Internally, debt repayments will amount to 17,474 million meticais (€242 million) this year and interest will amount to 51,338 million meticais (€712 million).

In the document, the government acknowledges that public debt servicing and the public sector wage and salary component alone “absorb, on average, around 85% of tax revenue, reducing the budgetary space for public investment”.

“To mitigate this impact”, the government assumes in the document that it will “continue with liability management actions, especially the replacement of short-term securities (three to five years) with long-term securities (five and 10 years, for example), relieving pressure on the State treasury in the short term”.

It will also “prioritize concessional external debt over domestic debt”, thus ensuring “better financial conditions for the country”, in addition to preparing the “update of the Medium-Term Debt Management Strategy”, aiming to “mobilize and encourage institutional investors to invest in long-term debt instruments, which will contribute to enabling an effective dispersion of public debt securities”.

The 2025 PESOE foresees GDP growth of 2.9% for 2025, an average annual inflation rate of around 7.0%, exports of goods worth US$8,431 million (€7,379 million) and Gross International Reserves of US$3,442 million (€3,045 million), equivalent to 4.7 months of coverage for imports of goods and services, excluding megaprojects.

State revenue for the whole year is expected to amount to more than 385,871 million meticais (€5,347 million), equivalent to 25% of GDP, and total expenditure to 512,749 million meticais (€7,107 million), corresponding to 33.2% of GDP, generating a budget deficit of 8.2%, equivalent to 126,878 million meticais (€1,759 million), financed in particular by issuing public debt.

Source: Lusa