Bank of Mozambique says public debt ratio has gone from high to severe risk

Banco de Moçambique diz que rácio da dívida pública passou de alto para risco severo

The Bank of Mozambique says that the country's ratio of public debt to Gross Domestic Product (GDP) worsened in the first half of the year, rising from the previous level of "high risk" to "severe risk" in June.

"This variation was influenced by the rise in total debt by around 2%, specifically in the domestic component, which increased by around 10%, although the external component fell by approximately 2%. Year-on-year, the ratio of public debt to GDP remained at the severe risk level," reads the Bank of Mozambique's Financial Stability Bulletin for the first half of the year.

As a result, he adds, the ratio of public debt to GDP "worsened and went from high risk in December 2022 to severe risk in June 2023".

It also notes that the "sovereign risk" last June "remained at a severe level, due to the maintenance of high levels of state indebtedness".

At the end of the first half of this year, the stock of Mozambican public debt, issued internally and contracted externally, amounted to 943,980 million meticais, compared to 926,850 million meticais in December 2022 and 889,700 million meticais in December 2021.

According to the Bank of Mozambique, in June 2023, the sub-index of the sovereign risk category stood at 87.5%, after 75% and 87.5% in December and June 2022 respectively.

In its analysis of the sub-indices that make up the risk category, Banco de Moçambique notes that the ratio of government credit to total credit stood at 38.87% in June, after 44.11% in December 2022, "and remained at the severe risk level".

"In year-on-year terms, the ratio of loans to the government to total loans also remained at the severe risk level, despite the 6.51 percentage point reduction recorded in the period," the report adds.

Mozambique's debt servicing costs will grow by 18% in 2024, to more than 116.631 billion meticais, according to government figures, quoted by the newspaper Económico.

According to the documents supporting the proposal for the Economic and Social Plan and State Budget (PESOE) for 2024, under discussion in parliament, the cost of servicing Mozambique's debt - interest payments and principal repayments - is estimated to be equivalent to 7.6% of estimated GDP next year.

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