Mozambique: Savings certificates to be launched next year

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Mozambique: Savings certificates to be launched next year

7:09 CAT | 27 Nov 2023

File photo: Notícias

Mozambique’s government plans to launch Popular Savings Certificates for subscription by private individuals next year as a way of diversifying and reducing the cost of domestic debt in the medium term.

The measure is included in the documents supporting the proposal for the Economic and Social Plan and State Budget (PESOE) for 2024, which are being discussed in parliament and to which Lusa had access on Ffriday, in which the government assumes the objective of “correcting the speculative nature of the domestic debt market” and “reducing the cost of financing domestic debt issues by the state”.

“A package of combined measures to reform the structure and functioning of the market is being prepared,” it reads.

One of these measures is to diversify the methods of issuing Treasury Bonds, in order to “create more efficient channels for non-bank creditors to participate in the market”, with “emphasis on institutional investors” such as pension funds and insurance companies, as well as “private individuals in general”, in this case “through the so-called Popular Savings Certificates”.

The government also admits to “discontinuing the approach of issuing annual series”, opting instead for an “approach of issuing by reference lines” at three, five, seven and 10 years “to achieve an optimum volume of liquidity that makes a secondary transactions market viable”.
At the same time, it intends to “favour an increase in the volume of the long maturity Treasury Bonds line” of seven to 10 years and “apply the Central Bank’s zero-interest financing line for liability management operations” for “anticipating amortisations”.

It also plans to “regulate an effective separation within banks” between brokerage and investor functions, “to mitigate conflicts of interest” in the primary market for issuing Treasury bonds and guarantees that it will “discontinue the payment by the state of the commission of 0.25% per amount issued” of domestic debt by Specialised Treasury Bond Operators.

“In the medium term, with the implementation of these reforms, the domestic debt market will become more structured and more functional, and its efficiency could spread to the financial system as a whole and to the entire economy as it will stimulate savings applications by companies and citizens,” says the government in PESOE 2024.

“At the same time,” the measures will “reduce the power of concentration” of the “monopoly of the banks”, as well as “reduce the financing costs for economic agents”, in this case “including the state, companies and individuals”.

Mozambique currently issues Treasury bills, with short maturities and Treasury bonds, with longer maturities, through stock exchange auctions.

The minister of economy and finance, Max Tonela, said in parliament this month that in the area of public debt, the government “has improved the assessment of fiscal risks and more prudent debt management, including the State Business Sector”.

He emphasised that “despite the challenges related to public debt management in the 2022 financial year”, Mozambique has seen “an improvement in sustainability indicators in relation to GDP, which stood at 78.2% compared to 80% at the end of the previous year”.

“We have established a new medium-term public debt management strategy, and we will continue to work to rationalise domestic debt issuance levels and guarantee reform measures that promote more competitive terms and conditions,” he concluded.

Source: Lusa