Mozambique Sees 12% Rise in Debt Interest Costs in 2024

Mozambique’s debt interest costs rose by 12% in 2024, reaching €857.4 million, with domestic and external debt expenditures increasing significantly. Total public debt marked a 9% growth, exceeding €15.8 billion. Concerns about the sustainability of government debt levels prompted warnings from officials regarding ongoing domestic debt expansion and rising interest rates.

In 2024, Mozambique witnessed a 12% increase in interest expenses on its debt, totaling 57.608 billion meticais (€857.4 million). This represents a significant rise from the 49.929 billion meticais (€743 million) allocated for debt servicing in 2023. The interest on domestic debt surged by 13%, surpassing 45.691 billion meticais (€680 million), while external debt interest payments reached nearly 11.395 billion meticais (€177.6 million), marking a 9.5% annual increase.

The country’s total public debt surpassed one billion meticais (€15.8 billion) in 2024, growing 9% over the year. By December 31, domestic debt had increased to over 407.085 billion meticais (€6.139 billion), with external debt exceeding 636.548 billion meticais (€9.6 billion). The slight 1.4% rise in external debt was attributed to adjustments from the transition to a new debt management system, while domestic debt rose by 21.8% due to short-term treasury bill issuances totaling 46.163 billion meticais (€696.2 million) and central bank credit facilities amounting to 28.10 billion meticais (€423.8 million).

A 2023 public debt report from the Mozambican Ministry of Economy and Finance raised concerns regarding the rapid growth of domestic debt, suggesting it could lead to unsustainable debt levels if trends continued. It noted that, should this growth persist over the next five years, the distribution of the debt could level out to a 50/50 domestic and foreign split by 2029, increasing risks related to commercial instruments in the portfolio.

As interest rates on treasury bills and operations have risen, the cost of domestic financing has escalated, influencing the average interest rate on government loans. The reported average rate rose from 5% in 2021 to 5.8% in 2022, reaching 6.5% in 2023. The report warns that refinancing risk remains a significant vulnerability due to the increasing concentration of public debt maturities in the short term.

Mozambique’s debt situation in 2024 revealed substantial increases in interest costs and total public debt amidst growing domestic borrowing. The government observed troubling trends that could indicate future fiscal unsustainability if domestic debt growth persisted. Rising interest rates compounded the financial strain, emphasizing the need for careful debt management to mitigate refinancing risks and ensure long-term sustainability.

Original Source: clubofmozambique.com