Mozambique: Public debt-to-GDP almost halved since 2016 but still above limit

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Mozambique: Public debt-to-GDP almost halved since 2016 but still above limit

7:34 CAT | 16 Sep 2024

File photo: TVM

Mozambique’s public debt-to-GDP ratio has almost halved since 2016, to 76%, but it is still above the sustainability threshold defined for low-income countries, according to a government report.

“Despite this improvement, the country still has debt ratios above the recommended sustainability thresholds (60% of GDP) for low-income countries,” reads a government report on fiscal risks for 2025, consulted on Friday by Lusa.

According to the document, from the ministry of the economy and finance, the public debt ratio, including contingent liabilities, reduced from 81.8% of Gross Domestic Product (GDP) in 2022 to 76% of GDP in 2023, a decrease of 5.8 percentage points in one year.

In nominal terms, Mozambique’s public debt stock totalled US$14.467 billion (€13.063 billion) at the end of 2022, rising to US$15.202 billion (€13.727 billion) in 2023, an increase absorbed in this case by higher GDP growth.

“This reduction reflects the improvement in nominal GDP in relation to the stock of total debt in 2023,” it explains.

In 2016, this ratio reached 123.6% of GDP, the document adds.

“During the period under review, there was a downward trend in the trajectory of external debt and an upward behaviour of domestic debt,” it goes on to say.

It also states that “although external debt represents a greater proportion as a percentage of GDP than domestic debt”, domestic debt servicing in 2025 will continue “to have a greater weight, with around 65% of debt servicing”, which corresponds to 90.3 billion meticais ( €1.276 billion).

“The risk of refinancing domestic debt persists, evidenced by the growing concentration of maturities in the short term,” the document points out, emphasising that the average maturity of domestic debt fell from 9.3 to 8.2 years, from 2022 to 2023, “while debt maturing within a year increased from 15% to 15.9%”.

“2025 is expected to be critical, due to the considerable volume of bonds (OT) maturing, increasing the pressure on the public budget,” the document warns.

It adds that “vulnerability over total debt burdens decreased in 2023” and that the proportion of public debt subject to changes in interest rates “decreased from 35.4% in 2022 to 33.4% in 2023”.

“Providing greater stability to the debt service,” it concludes, recognising that on the other hand the debt contracted at a fixed interest rate increased from 77.3% in 2022 to 83.3% in 2023.

Source: Lusa