Mozambique announced the issue of 609 million meticais (approximately 8.6 million dollars) in Treasury Bonds, with a maturity of five years. The operation was announced by the Mozambique Stock Exchange (BVM) and was met with a great deal of interest from traders.
The issue corresponds to the 10th series of 2024 Treasury Bonds and was intended for direct subscription by specialized operators. The ratio between demand and supply was 22.51%, with bids totaling 1.2 million meticais.
With a fixed nominal interest rate of 15% for the first four six-monthly payments and variable for the last six, this operation aims to balance the government’s financing needs. However, the increase in domestic public debt is a growing concern. According to data from the Bank of Mozambique, domestic debt totaled 364.2 million meticais, representing a significant increase in recent months.
The Economic Situation and Inflation Outlook report, published in May, reveals that the domestic debt contracted by 51.9 million meticais, amounting to 23.7% of the country’s Gross Domestic Product (GDP). This includes 99.8 million meticais in Treasury Bills and 169 million in Treasury Bonds.
The Ministry of Economy and Finance has warned about the rapid growth of domestic debt, predicting that if this trend continues, the ratio between domestic and foreign debt could reach 50% by 2029. This scenario is alarming, as it could put the country’s financial sustainability at risk.
Interest rates on Treasury Bills and Treasury Bonds have also risen, resulting in higher costs for domestic financing. The weighted average rate on government loans rose from 5% in 2021 to 6.5% in 2023, accumulating an increase of 150 basis points in just two years.
Mozambique’s recent issuance of treasury bonds is a reflection of the government’s financing needs, but also highlights the growing public debt challenge. The attention of the authorities and investors will be crucial to ensure the country’s financial sustainability in the coming years.
