Mozambique: State debt servicing costs rise 6.4% to €628M in first 9M 2024

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Mozambique: State debt servicing costs rise 6.4% to €628M in first 9M 2024

4:01 CAT | 19 Nov 2024

File photo: Banco de Moçambique

Mozambique’s public debt costs grew by 6.4% in the first nine months of the year, compared to the same period in 2023, to 42,428 million meticais (€628 million), according to official figures.

Mozambique’s public debt burden grew by 6.4% in the first nine months of the year, compared to the same period in 2023, to 42.428 billion meticais (€628 million), according to official data.

According to the Ministry of Economy and Finance budget execution report up to the end of the third quarter, debt burdens, including interest, represented 78.3% of the total budgeted for 2024.

Interest payments on domestic debt alone amounted to more than 29.383 billion meticais (€435 million), equivalent to 78.1% of the annual budget, a reduction of 2.3 percentage points compared to the same period in 2023.

External interest payments reached more than 10.817 billion meticais (€160.2 million), corresponding to an implementation of 75.7% of the total budgeted for 2024, in this case a year-on-year growth of 16.8%.

Lusa reported this month that Mozambique’s debt stock reached 396.056 billion meticais (€5.7 billion) at the end of September, up 26% compared to the end of 2023, according to budget execution data.

According to the budget execution from January to September, this stock compares with 313.78 billion meticais (€4.516 billion) on 31 December, 2023, and results mainly from new issues of treasury bills (BT, shorter maturities) and bonds (OT, longer maturities) totalling 209.833 billion meticais (€3.020 billion) in nine months.

In contrast, the Mozambican state made repayments of its domestic public debt in the same period to the amount of 127.557 billion meticais (€1,836 million), in this case essentially of treasury bills.

“Regarding the repayment of domestic debt, in addition to the amount corresponding to the payment of Treasury Bonds and Bank Financing, the amount of 537.8 million meticais [€7.7 million] was also disbursed in relation to the payment of debts with suppliers of goods and services from previous years, within the scope of Fiscal Restructuring and Consolidation,” details the report.

At the end of September, the accumulated stock of public debt amounted to 1.04 trillion meticais (€15 billion), of which almost 648,883 million meticais (€9,340 million) was external debt, a slight reduction compared to last December.

In July, the International Monetary Fund (IMF) expressed concern about Mozambique’s dependence on issuing short-term public debt, as it increases the country’s “financing risks”.

“The extensive dependence on short-term domestic debt in recent years has increased refinancing risks for the government. Domestic debt increased from 19% of GDP in 2019 to a peak of around 28% of GDP in 2022,” the IMF noted in its report on the fourth review of the Extended Credit Facility (ECF) programme, completed in July.

Although medium-term debt “represents the largest share of domestic debt”, equivalent to 50% of the total last year, the IMF also highlights that “short-term debt increased from 19% to 27% of total domestic debt between 2019 and 2023”.

“In a context of rising sovereign debt yields,” the IMF said that the Mozambican authorities “have been reluctant to accept higher long-term domestic debt yields”, which is reflected “in bid ratios at Treasury Bond auctions that frequently fall below 100%, with the average ratio for April and May 2024 at 62%”.

“The spread of Treasury Bill rates [shorter maturities] over the monetary policy rate has also widened over the past year, rising from around 50 basis points [for one-year maturities] in early 2023 to over 200 basis points in April 2024,” the report reads.

Source: Lusa