The Bank of Mozambique recently released its report on the economic situation and inflation outlook in the country, revealing a continuous increase in domestic public debt. Between December 2022 and November 2023, the accumulated amount of domestic credit increased significantly by around 59,327 million meticais, totalling a domestic debt of approximately 334,440 million meticais.
The main instruments used to finance the cash deficit are treasury bonds and advances to the Bank of Mozambique. In the short term, the trend is for this scenario to continue, due to the limited collection of tax revenues and the weak disbursement of external resources.
The short-term outlook is in line with the evolution of the Industrial Production Index (PMI), which, despite a slowdown, still maintains a positive reference level. However, credit to the economy remains subdued, reflecting the annual slowdown in credit to the economy granted by the banking system in September 2023. This dynamic is essentially attributable to the restrictive monetary conditions in force.
Domestic public indebtedness, as indicated in the report, remains a concern. The country has contracted a considerable cumulative amount of domestic credit, with treasury bonds and advances at the Bank of Mozambique being the main means of covering the cash deficit.
However, it is important to note that the country’s international reserves remain at satisfactory levels. As of 15 November 2023, gross international reserves recorded an accumulated balance of approximately USD 3,143 million. This amount is enough to cover around 4 months of imports of goods and services, excluding major projects.
To summarise, the increase in domestic public indebtedness highlights financial challenges, but the maintenance of robust international reserves offers some relief. Careful management of these factors will be crucial to guaranteeing economic stability in the current scenario.
