Mozambique: Second issue of treasury bonds this year sees €52.6M placed

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Mozambique: Second issue of treasury bonds this year sees €52.6M placed

3:32 CAT | 18 Jan 2024

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

The Mozambique state placed the equivalent of €52.6 million in the second issue so far this year of treasury bonds, with the interest rate rising to 19.5%, according to data from the Mozambique Stock Exchange (BVM).

This is the second issue in the space of a week and, according to the stock exchange, which conducted the operation on Wednesday, the bids submitted by the Specialised Treasury Bond Operators represented an overall demand of 4.152 billion meticais (€59.8 million), “with a demand to supply ratio of 102.8%” and a minimum interest rate of 19.5% and maximum of 23%, for a maturity of five years.

“According to the cut-off rate” defined for the operation, the value of this issue of Treasury Bonds 2024 – 2nd Series, whose interest rate rose to 19.5% compared to the previous ones, was 3.652 million meticais (€52.6 million), for an amount initially requested of 4.039 billion meticais (€58.2 million).

In the first Treasury Bond issue of the year, also carried out through BVM, on 10 January, the Mozambique state placed 2.065 billion meticais (€29.5 million) with a five-year maturity, for an initial requirement of 2.198 billion meticais (€31.5 million), paying 18.0% interest, which was also higher than in previous such sales, but with a demand of 123.61% of supply.

The country’s government is forecasting a 2024 public sector budget deficit equivalent to €2.340 billion, or 10.4% of the Gross Domestic Product (GDP), an increase of almost 40% compared to this year, which will be financed with new debt.

According to the documents supporting the Economic and Social Plan and State Budget (PESOE) for 2024, the government expects to collect more than 383,537 million meticais (5,627 million euros) in revenue, corresponding to 25% of the estimated GDP and an increase of 7.5% compared to the budget for 2023.

On the state expenditure side, the budget forecast for next year is more than 542,695 million meticais (7,959 million euros), equivalent to 35.3% of GDP and an increase of 15% compared to the budget for 2023.

The budget deficit forecast by the government for this year is more than 159,488 million meticais (2,340 million euros), an increase of 38.6% compared to the estimate for 2023, where the figure is more than 115.058 billion meticais (€1.688 billion). In 2022, the budget deficit was 142.059 billion meticais (€2.084 billion).

To finance the deficit, the government plans to resort to foreign aid, totalling more than 83.342 billion meticais (€1.223 billion), external loans, to the tune of 29.482 billion meticais (€432 million), and internal credit, in this case to the tune of 46.333 billion meticais (€680 million).

In 2023, the government budgeted for 57.477 billion meticais (€843.1 million) in foreign aid to cover the deficit, almost 20.933 billion meticais (€307 million) in external loans and 36.648 billion meticais (€536 million) in debt issuance, of which 96% had been completed by the end of October.

The government had earlier approved its Public Debt Management Strategy 2023-2026, which guides debt options over the next few years and aims to “set limits for debt sustainability indicators in credit contraction.”

In terms of external debt, it plans to “prioritise financing in the form of donations” and “in the form of highly concessional loans for profitable projects,” while in terms of domestic debt the priority was to be to “prioritise the issue of long maturity treasury bonds.”

Source: Lusa