Mozambique’s government has exhausted its budgeted domestic borrowing target for the year, depleting a key source of deficit financing it had heavily relied on.
(Bloomberg) — Mozambique’s government has exhausted its budgeted domestic borrowing target for the year, depleting a key source of deficit financing it had heavily relied on.
The government has reached 99.8% of the budgeted limit and has “no room for further contraction of domestic debt,” the Council of Ministers said in a statement late Tuesday.
Mozambique, one of the world’s poorest nations, was effectively shut out of foreign debt markets after the so-called tuna-bond scandal that emerged in 2016 led to default and a slew of court cases from New York to London. Government financing has come under strain after record-breaking storms destroyed infrastructure and crops. Fighting an insurgency has also drained funds, while the violence has delayed natural gas projects worth tens of billions of dollars.
Last year, the government agreed to an economic program with the International Monetary Fund that included about $456 million of funding over three years. Part of that agreement placed limits on how much debt it can raise at home.
By July, public domestic debt had surged 12% to 308 billion meticais ($4.8 billion), from 275 billion meticais at the end of December — when it was already in breach of the agreed level. According to an IMF report last month, Mozambique shouldn’t exceed 350 billion meticais of domestic borrowing at the end of the year.
The state has this year struggled to finance a wage bill that jumped more than expected after reforms. It was also late in servicing some local-currency bonds, which S&P Global Ratings said constituted a selective default. The finance ministry attributed the late salaries to administrative troubles.
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