In Mozambique’s 2022 treasury bond market, strategic actions by bond operators significantly affected bond issuance and public auction participation, leading to profound fiscal impacts. BCI Bank’s issuance of treasury bonds with variable interest rates, amidst anticipated hikes in interest rates, strategically advantaged the bond operator, resulting in considerable private gains at the expense of the state. This article also sheds light on the transition of former Frelimo party leaders to top positions in the country’s major banks. The analysis underscores problematic political dynamics, with BCI Bank’s appointment of Mozambique’s former prime minister as the President of the Board of Directors, raising concerns over potential conflicts of interest and the capture of the public sector by private interests. Consequently, the state faces an additional fiscal burden of 1.6 billion MZN in interest payments due to the issuance of bonds with variable rather than fixed interest rates in early 2022. These findings underscore the need for more transparency and regulatory oversight in the treasury bond market. The paper calls for immediate policy measures to enhance accountability and protect Mozambique’s fiscal health from practices that disproportionately benefit a select few at the expense of the public coffers.
