In the first week of June, the economic panorama was marked by government decisions, criticism from experts and growth forecasts that promise to impact the country’s future. The government decided to suspend new telecoms tariffs in response to concerns raised by society. Economists continue to debate the effectiveness of the new minimum wages, pointing out that they are still far from meeting citizens’ basic needs. The International Monetary Fund (IMF) issued a warning about the fiscal risks associated with increasing the public wage bill. In contrast, the African Development Bank (AfDB) sounded a positive note, predicting significant GDP growth and a reduction in inflation. In addition, other relevant issues, such as support for youth entrepreneurship and investments in marine conservation, were also highlighted. Let’s explore each of these themes in detail.
The International Monetary Fund (IMF) issued a warning about Mozambique’s fiscal sustainability, emphasising the need to control public spending, especially that related to the payroll. The IMF warned that the continued increase in spending on public salaries could jeopardise the country’s financial stability. In 2022-23, the wage bill increased considerably, raising monthly expenditure from 11.6 billion meticals (182.5 million dollars) to 15.8 billion meticals (249.4 million dollars). The trend for 2024 points to a possible worsening of this scenario, with the risk that spending on public salaries will exceed the 2024 budget law by approximately 12 billion meticals (188.1 million dollars).
In addition, the IMF stressed that it is crucial to rationalise spending on the wage bill in order to guarantee long-term budgetary sustainability. The organisation highlighted the importance of prioritising social spending and improving public debt management to avoid future economic imbalances. Pablo Lopez Murphy, head of the IMF team, stressed that rationalising wage bill spending should be the basis of fiscal consolidation, while social spending should be a priority. ‘Fiscal consolidation and rationalisation of public spending are essential to ensure Mozambique’s fiscal sustainability and avoid economic imbalances in the future,’ he stressed.
In contrast to the challenges pointed out, the African Development Bank (AfDB) provided optimistic forecasts for the Mozambican economy. The institution predicts that Mozambique’s Gross Domestic Product (GDP) will grow by 5.2 per cent in 2024-25, driven mainly by the extractive sector, especially gas production, agriculture, private consumption and foreign direct investment. In addition, inflation is expected to fall to 5.0 per cent this year and 4.6 per cent in 2025, thanks to a prudent monetary policy. However, the AfDB warned of possible AfDB impacts resulting from climate change and the political uncertainty associated with the upcoming general elections. The institution emphasised that, despite economic growth, it is necessary to continue implementing structural reforms to ensure a sustainable and inclusive economic transformation.
Finally, the European Union (EU) announced a disbursement of 2.7 billion meticals (35 million euros) to support marine conservation programmes in Mozambique. This funding, according to the EU, aims to promote the sustainability of marine resources and strengthen the blue economy in the country. The partnership between the EU and the Ministry of the Sea, Inland Waters and Fisheries (MIMAIP) aims to guarantee the conservation of fishing resources and the well-being of economic operators, contributing to the protection of the marine environment.
In addition to the main headlines, other important issues also marked the week. State revenue from concessions fell by 3.6 per cent in the first quarter of 2024, standing at 1.6 billion meticals (24.8 million dollars). The Port of Maputo concession continues to be the most profitable, followed by the Cahora Bassa Hydroelectric Plant (HCB). This drop in revenue reflects the need for more effective strategies to manage and maximise the benefits of the concessions.
The government decided to suspend the new telecoms tariffs in response to concerns raised by society. Economists continue to debate the effectiveness of the new minimum wages, pointing out that they are still far from meeting citizens’ basic needs
The government has taken the decision to immediately suspend the new minimum tariffs for voice calls, SMS and data, recently approved by the National Communications Institute of Mozambique (INCM). This measure was announced by the Deputy Minister of Transport and Communications, Amilton Alissone, after a session of the Council of Ministers. The decision to revert to the previous tariffs comes in response to criticism from society, which considered the new prices to be excessively high. The suspension will remain in force while the communications regulator carries out a study to determine more appropriate tariffs for the national market. As of the date of publication of this article, the INCM has yet to make an official statement on the suspension of the new tariffs, and the operators continue to apply the tariffs previously decreed.
At the same time, the new minimum salaries approved by the government continue to generate debate among economists and experts. Despite the wage increases, which range from 3.3 per cent to 10.53 per cent for private sector workers, many economists argue that these figures are insufficient to cover citizens’ basic expenses. Estrela Charles, a researcher at the Centre for Public Integrity (CIP), pointed out that due to the high costs of transport, food and essential services, the new minimum wages are unable to provide workers with a dignified life. ‘This wage shortfall reduces families’ purchasing power, worsening the already fragile economic situation of many Mozambicans. To improve the situation, factors such as inflation and the cost of living need to be taken into account when setting wage increases,’ he added.
In addition, Egas Daniel, senior economist at the International Growth Centre (IGC) of the London School of Economics (LSE), stressed that the salary increases, especially the 3.3%, are below the average inflation of last year, resulting in a loss of purchasing power. The economist pointed out that, historically, wage increases in Mozambique have failed to compensate for sectoral performance and inflation, which suggests a violation of the agreed formula for calculating wage increases. Estrela Charles added that the high cost of basic services such as education and health, which should be free or accessible, further aggravates the situation of workers. ‘This situation leads to greater pressure on family incomes, contributing to a vicious circle of economic hardship and social dissatisfaction,’ she concluded.
‘Fiscal consolidation and rationalisation of public spending are essential to ensure Mozambique’s fiscal sustainability and avoid economic imbalances in the future’
In the entrepreneurship sector, young Mozambicans continue to face significant challenges in accessing finance and developing their businesses. Bureaucracy, lack of specific training and high demands from financial institutions are recurring obstacles. Young entrepreneurs like Vasco Cossa and Nivaldo Thierry highlight the need for de-bureaucratisation and greater government support to facilitate access to credit and promote the development of startups. Proposals include the creation of business incubators and improvements to infrastructure to make the business environment more favourable for young people.
The mining sector was also in the spotlight this week, with Syrah Resources facing difficulties due to unforeseen developments in the graphite market. The company, which operates in Balama, Cabo Delgado province, has seen its production and sales of natural graphite affected by the expansion of synthetic graphite capacity and government policies in the Chinese market. However, Syrah Resources maintains an optimistic outlook for the future, with expectations of increased demand for graphite for electric vehicles and improvements in market conditions.
