Africa-Press – Mozambique. Mozambique’s public debt increased again in the second quarter of this year, reaching US$17.4 billion, the equivalent to 79.1% of the country’s gross domestic product (GDP). These figures are included in the most recent Quarterly Bulletin on Public Debt, released by the Ministry of Finance.
According to the most recent quarterly bulletin, between April and June of this year, the total stock of central-level debt, public debt, grew 0.1%, driven by domestic issuance, while the external component contracted slightly. Overall, the debt volume rose from 1.071 trillion to 1.072 trillion meticais.
“The growth in central government debt was primarily influenced by domestic debt, driven by new issuances under the Central Bank’s Credit Facility,” the bulletin states.
At the end of June, domestic debt reached 444.9 billion meticais, an increase of 0.4% compared to the previous quarter. Treasury bonds represented 38.8% of the total, followed by treasury bills (33.6%). The “other” component, which includes central bank financing, now represents 27.6% of the portfolio.
Domestic debt service totalled 78.7 million meticais, a 9% increase compared to the first quarter, explained by the greater concentration of bond maturities.
Conversely, external debt fell 0.1%, to US$9.8 billion. The bulletin cites regular debt service payments and the government’s commitment to “prioritize financing under highly concessional conditions and grants” as reasons.
The largest share of external debt remains in the hands of multilateral creditors (56.1%), notably the International Development Association (IDA), which holds 30.3% of the total, and the International Monetary Fund (IMF), with 10.1%. Among bilateral creditors, China is the main creditor with (13.7%), followed by Japan (4.1%) and Portugal (3.9%).
In the quarter under review, external debt service fell 53.1%, to US$98.6 million, temporarily easing pressure on public finances.
One of the greatest concerns comes in connection with the state-owned enterprise sector (SEE), whose direct debt rose 7.2% in the second quarter to 39.5 billion meticais (US$619 million).
The pressure came mainly from external debt, which grew 14.5%, driven by new financing taken out by Mozambique Railways (CFM) worth US$36 million, earmarked for the expansion of the fuel terminal in Pemba. State-owned Electricidade Moçambique (EDM), Mozambique Airports, and Tmcel also saw increases in their debt stock.
In terms of internal debt, CFM stood out again, with an increase of 504 million meticais, followed by Cahora Bassa Hydroelectric (HCB) , which increased its debt by 53 million.
The report warns that 90% of state-owned companies’ debt is indexed to variable interest rates, which increases their vulnerability in scenarios of international financial instability.
The growth in public debt is not just a macroeconomic statistic: it has direct repercussions on the daily lives of families and businesses. The greater the state’s need to finance itself internally through treasury bills and bonds, the greater the competition with the private sector for available credit, driving up interest rates and limiting the investment capacity of small and medium-sized businesses, which are the main generators of employment.
For families, the effect translates into reduced purchasing power, as the government, pressured by debt service, is forced to cut social spending or increase indirect taxes, which hit the poorest the hardest. Furthermore, when a large portion of the state budget is allocated to interest and amortization payments, there is less room to invest in health, education, transportation, and infrastructure – services on which citizens directly depend.
The aggregate stock of public and guaranteed debt, which includes the central government and the corporate sector, grew from US$17.35 billion in the first quarter to US$17.41 billion in the second quarter, the equivalent to 1.112 trillion meticais.
The bulletin notes that, despite controlled inflation—4.0% in April and May, and 4.2% in June—and the reduction of the monetary policy interest rate to 11%, significant internal risks persist, such as “the worsening of fiscal risk, uncertainties regarding the restoration of productive capacity, and the impacts of climate shocks”.
Experts have warned that the debt trajectory continues to place serious pressures on public finances, stressing that Mozambique has no room for relaxation. With 79% of GDP already earmarked, debt sustainability will only be possible with fiscal discipline, robust economic growth, and diversification of revenue sources, the bulletin concludes.
For More News And Analysis About Mozambique Follow Africa-Press
