Interest costs on Mozambique’s debt surged by 12% in 2024, totaling 57.608 billion meticais (€857.4 million), compared to 49.929 billion meticais (€743 million) in 2023. Domestic debt expenses rose by 13%, while external debt interest increased by 9.5%. The public debt stock exceeded one billion meticais (€15.8 billion), raising concerns about debt sustainability, particularly with the growth of domestic debt and rising interest rates.
Mozambique’s interest costs associated with its debt have risen by 12% in 2024, amounting to 57.608 billion meticais (approximately €857.4 million). This figure represents an increase from 49.929 billion meticais (€743 million) spent in 2023 to service its debt. The domestic debt interest component substantially increased by 13% to over 45.691 billion meticais (around €680 million), while external debt interest expenses reached nearly 11.395 billion meticais (€177.6 million), reflecting a 9.5% increase from the previous year.
In 2024, Mozambique’s public debt stock surpassed one billion meticais (€15.8 billion), marking a 9% annual rise. Reports indicate that the country’s debt elevated from January to December 2024 to nearly 1.069 billion million meticais. Of this total, the domestic debt stock exceeded 407.085 billion meticais (€6.139 billion) at year-end, while external debt surpassed 636.548 billion meticais (€9.6 billion).
The increase in external debt, recorded at 1.4%, primarily resulted from adjustments linked to the new debt management system, ‘Meridian’. Conversely, domestic debt rose by 21.8%, largely attributed to short-term Treasury Bills issuance valued at 46.162 billion meticais (€696.2 million) and a Credit Facility from the central bank worth 28.1 billion meticais (€423.8 million).
The Ministry of Economy and Finance’s 2023 public debt report cautioned regarding the growth in domestic debt. There is a risk that sustained growth at this level over the next five years may lead to an equal balance between domestic and foreign debt by 2029, potentially compromising debt sustainability. The report stated, “If domestic debt continues to grow at the current rate… the stock could balance out at 50% domestic/50% foreign by 2029.”
With the rise in interest rates for Treasury Bills and Operations, the cost of domestic financing has prompted a steady increase in the weighted average interest rate for the government’s loan portfolio. The interest rate has climbed from 5% in 2021 to 5.8% in 2022, and now stands at 6.5% in 2023, representing a cumulative increase of 150 basis points over two years. The report emphasized the refinancing risk characterized by the short-term concentration of public debt maturities as the primary vulnerability.
Mozambique’s rising interest debt costs reflect increased financial pressures on the state. With significant growth in both domestic and external debt, concerns over long-term sustainability and refinancing risks are prevalent. Effective management and strategic planning are essential to mitigate potential economic challenges stemming from escalating debt levels. Overall, action is required to address the looming debt sustainability concerns highlighted in the Ministry’s report.
Original Source: clubofmozambique.com
