Mozambique: State places €8.6M of five-year bonds in internal stock market issue

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Mozambique: State places €8.6M of five-year bonds in internal stock market issue

3:40 CAT | 27 Sep 2024

File photo: Lusa

Mozambique this week placed 609 million meticais (€8.6 million) of Treasury Bonds (OTs) with a maturity of five years, in an internal stock market issue, according to official data to which Lusa had access on Thursday.

According to information from the Mozambique Stock Exchange (BVM), this operation took place on Tuesday and the bids submitted by the licensed specialised treasury bond operators indicate that the demand and supply ratio was 22.51%, reaching 1.209 billion meticais (€17 million).

This OT issue, the 10th series of 2024, for direct subscription by specialised operators, authorised the placement of up to 5.370 billion meticais (€75.4 million), with a fixed nominal interest rate of 15% during the first four half-yearly interest payments and variable for the last six payments.

The domestic public debt issued by Mozambique totalled 364.251 billion meticais (€5.115 billion), after growing by the equivalent of more than €740 million in five months of 2024, according to central bank data previously published by Lusa.

According to the government’s Economic Situation and Inflation Outlook report for May, domestic public debt contracted between December 2023 and May of this year, excluding that resulting from loan contracts, leases and overdue liabilities, “increased by around 51,910 million meticais” (€729 million) by the end of May.

Overall, domestically issued debt at the same date represented the equivalent of 23.7% of Mozambique’s gross domestic product, and was essentially made up of Treasury Bills (BTs), with shorter maturities, with a stock on 28 May of 99.853 billion meticais (€1.402 billion), and OTs, which totalled 169.089 billion meticais (€2.374 billion), as well as 95.309 billion meticais (€1.338 billion) in advances at the Bank of Mozambique.

In April, the 2023 public debt report by Mozambique’s Ministry of Economy and Finance warned of the pace of growth of domestic debt, which, if it continues, threatens attempts to turn around the country’s debt situation: “If domestic debt continues to grow at the current rate over the next five years, the breakdown of the stock could balance at 50% domestic/50% external by 2029, with a portfolio dominated by purely commercial instruments, a scenario that would jeopardise the possibilities of reversing the unsustainability of the debt in this generation.”

As the interest rates on BTs and OTs “have risen, the cost of domestic financing has driven a continuous upward adjustment of the weighted average interest rate on the government’s loan portfolio,” it said.

The rate went from “5% in 2021 to 5.8% in 2022 and now 6.5% in 2023, making a cumulative increase of 150 points in two years,” says the report, which also warns that the “refinancing risk, reflected in the growing concentration of maturities” of public debt “on the short-term horizon, represents the greatest vulnerability.”

The accumulated domestic debt up to 31 December 2023 amounted to the equivalent of $4.9113 billion (€4.616 billion). The weight of BT issues in the total stock rose from 4% in 2019 to 9% in 2023, while that of OTs doubled to 16% in the same period.

Source: Lusa