Mozambique exchanged 3.694 billion meticais of 2021 internal debt for new securities, marking the year’s first operation. Although demand was notable, it did not meet the maximum exchange cap. Rising interest rates on debt have led to increased costs and heightened sustainability concerns, as domestic debt continues to grow significantly.
On Tuesday, Mozambique’s government completed an internal debt exchange, converting a 2021 issuance into new securities worth over 3.694 billion meticais, equivalent to 52.9 million euros. This transaction marked the first operation of 2023. The Mozambique Stock Exchange (BVM) indicated that the maximum cap for such exchanges was set at 5.2 billion meticais, and the demand received fell short of this limit.
The overall demand for the issuance was reported at 3.744 billion meticais, or 54.1 million euros, indicating a demand-to-supply ratio of 72%. Notably, 71.04% of this demand originated from the exchange of Treasury Bonds (OT), while the remaining 0.96% comprised new allocations. Ultimately, the effective value of the issuance corresponded to 3,694,208,500 meticais, achieving nearly 98.66% of total demand.
In a related report, it was highlighted that Mozambique’s interest charges on debt surged by 12% in 2024, totalling 57.608 billion meticais, or roughly 857.4 million euros, in contrast to 49.929 billion meticais expended in 2023. The cost of domestic debt interest alone increased by 13% to over 45.691 billion meticais.
Mozambique’s public debt stock has reportedly surpassed one billion meticais, reflecting a 9% annual increase. Official data indicated that by December 31, domestic debt amounted to over 407.085 billion meticais while external debt was reported at over 636.548 billion meticais. The Ministry of Economy and Finance pointed out that if the current rapid growth in domestic debt persists, it may lead to a precarious 50-50 balance between domestic and foreign debt by 2029, significantly jeopardizing attempts to address unsustainability issues in the nation’s debt.
The alarming trend is compounded by rising interest rates on Treasury Bills and Treasury Operations, which have escalated the cost of domestic financing. The weighted average interest rate on government loans climbed from 5% in 2021 to 6.5% in 2023, increasing refinancing risks associated with the short-term concentration of maturities, posing considerable vulnerabilities to economic stability.
In conclusion, Mozambique’s recent internal debt exchange highlights the ongoing challenges the nation faces regarding debt management. With rising interest payments and increasing public debt levels, there is a pressing concern about the sustainability of the current trajectory. If the growth in domestic debt continues unchecked, the risk of reaching a precarious balance between domestic and foreign debt will increase, complicating efforts to establish sustainable fiscal practices.
Original Source: clubofmozambique.com
