The proposal for the Economic and Social Plan and State Budget (PESOE) for 2026 dominated this week’s economic news, revealing two major developments: the government’s intention to use the newly established Mozambique Sovereign Fund to finance priority public works, and the forecast of a record-high level of state spending.
According to the document submitted to Parliament, six key infrastructure projects will be financed through the Sovereign Fund, with a total allocation of 2.9 billion meticais (USD 44.9 million).
Among the planned projects are the construction of a bridge over the Save River in Massangena (Gaza Province), the building and equipping of Chibuto District Hospital, the establishment of new primary schools, as well as urbanization and land infrastructure works. The Locomue Dam and customs posts are also included on the list.
These investments will be financed through revenues from liquefied natural gas (LNG) production, with the first proceeds—totaling USD 210 million—already deposited into a transitional account at the Bank of Mozambique, as stipulated in Law No. 1/2024.
Designed to ensure macroeconomic stability and intergenerational savings, the Sovereign Fund will thus be deployed to support social and infrastructure development, fulfilling its role as a catalyst for economic diversification.
The same document anticipates a 4.5% increase in public spending for 2026, reaching 535.6 billion meticais (USD 8.7 billion)—a new record, surpassing the 512.7 billion meticais (USD 8.3 billion) allocated for 2025.
Most of the spending—around 70%—will go toward state operations, primarily public sector wages, while roughly one-fifth of the budget will be directed toward public investment.
Authorities warn, however, of the structural rigidity of public expenditure, citing growing pressures from the wage bill and public debt servicing. These challenges have prompted the Ministry of Finance to advocate for greater fiscal discipline and clearer budgetary priorities, especially given Mozambique’s continued dependence on external financing.
At the same time, Mozambique received a positive signal from the international community with its removal from the Financial Action Task Force (FATF) “grey list,” where it had been since October 2022.
The decision—taken unanimously at the FATF plenary in Paris—followed Mozambique’s full implementation of the 26 corrective actions required by the organization.
Finance Minister Carla Louveira had announced in June that all stipulated measures had been carried out, leading the FATF to acknowledge Mozambique’s progress in combating money laundering and terrorist financing.
This delisting strengthens confidence in Mozambique’s financial system and is expected to boost investor and international partner trust, particularly as the country prepares to leverage its extractive revenues strategically.
On the monetary policy front, the Bank of Mozambique reported that Net International Reserves reached a new high of USD 4 billion (MZN 252.8 billion) in August.
This gradual recovery—beginning in March after hitting a low of USD 3.5 billion in February—reflects a positive trajectory in the country’s foreign exchange capacity, despite ongoing foreign currency access constraints faced by economic sectors.
According to the central bank, the current reserve level covers more than three months of estimated import needs, serving as an important pillar of macroeconomic stability.
To reinforce this trend, the institution has adopted measures to improve liquidity in the foreign exchange market, notably by raising the mandatory conversion rate of export earnings from 30% to 50%, and limiting the daily foreign currency holdings of commercial banks.
Text: Felisberto Ruco
