The latest Economic Outlook and Inflation Prospects Report from the Bank of Mozambique reveals that the country’s internal debt stock is currently valued at 447,227 million meticais. This compares to a total of 415,556 million meticais at the end of December, which was equivalent to 29.5% of the GDP projected for 2024.
This represents a 7.6% increase over three months, amounting to an additional 31,671 million meticais (447 million euros) through the issuance of Treasury Bills, short-term internal debt, and central bank advances. Meanwhile, the stock of Treasury Bonds saw a decline of 7,108 million meticais (100 million euros) in the past year, primarily due to the absence of new issuances since December.
Currently, central bank advances to the state amount to 125,441 million meticais (1,769 million euros), according to the report.
“Pressure on internal public debt continues to worsen,” the central bank warned on March 26 during the Monetary Policy Committee (CPMO) meeting update.
This warning coincided with a decision by the financial rating agency Standard & Poor’s (S&P) two days earlier, which lowered Mozambique’s internal public debt rating to Partial Default due to payment delays to creditors and changes in a debt issuance.
“This indicates that we are left with an almost speculative debt instrument. Being speculative, few investors will want to include this instrument in their portfolio,” commented the Governor of the Bank of Mozambique, Rogério Zandamela, at the same time.
“It undermines investor confidence. This has implications for the external credit access of families, companies, and the State,” he added, highlighting the possibility that some investors may seek to “divest” from Mozambican debt securities in which they have invested.
Finance Minister Carla Loveira clarified that the internal debt swap auctions being conducted are part of the current public debt management strategy.
“We have some Treasury Bills issued in the past, with their expiration this year. It is up to the Government to decide on simple closure, payment, or renewal. The current strategy, until 2025, foresees what we call swap auctions,” explained the minister.
She emphasized that the swap auctions are part of the current debt management strategy (2022-2025), which will be reviewed by the new government, taking office in January, for the period from 2026 to 2029.
“We are also working with our public debt consultants, including those from the World Bank, the International Monetary Fund, and other agencies that assist in our country’s debt-related matters,” added Carla Loveira.
S&P described that Mozambique “exchanged 3.7 billion meticais [50 million euros] worth of local currency debt due in March 2025 for securities with longer maturities and lower interest rates, due in March 2030,” noting that “the continued resort to these liability management operations, coupled with a history of internal debt payment delays, reflects Mozambique’s fiscal and liquidity constraints.”
Meanwhile, the financial rating agency Moody’s downgraded Mozambique’s long-term internal debt rating to Caa3, three notches away from financial default, due to payment delays and a debt swap.
Moody’s explained on April 4 that the revision “reflects the Government’s severe liquidity problems,” primarily due to “debt refinancing difficulties and budget pressures, further exacerbated by the political and social unrest following the early October general elections.”
