Africa Monitor

Africa Monitor Intelligence

Mozambique: Risks for the Financial System from Exposure to Sovereign Debt

Sovereign debt remains the main systemic risk of the Mozambican financial system. The BdM classifies it as "severe risk", influenced by the high ratio of credit to the government and the excessive weight of public debt over GDP, reflecting the growing weight of the State in the financial system.

The accumulation of the State's internal debt has resulted from the issuance of short-term treasury bills (BT) and medium and long-term treasury bonds (OT). Another part is BdM obligations and credits from suppliers of goods and service to the State.

The growth of domestic debt became necessary to offset the high price of money in international markets in the face of country risk. Millennium BIM, Standard Bank, BCI-Banco Comercial de Investimentos and ABSA Bank have been the main creditors of the State among commercial banks. Public works such as the construction of ministerial or public buildings resulted in new charges for the State with commercial banks. READ MORE