The week brought significant advances in the energy sector and financial relief measures, but also revealed deep vulnerabilities in public accounts. The government approved a new budget with a high deficit, the IMF demanded urgent reforms, and workers criticised the announced wage increases. The announcement of the resumption of the Mozambique LNG project by TotalEnergies comes as a positive sign amid the uncertainty.
TotalEnergies announces resumption of gas project in 2025
TotalEnergies has confirmed that it will resume the Mozambique LNG project by mid-2025, which had been suspended since April 2021 due to security instability in Cabo Delgado. The decision, announced by the company’s CEO, Patrick Pouyanné, comes after consistent signs of improvement in security conditions, attributed to the joint action of the Mozambican Defence and Security Forces, the SADC and Rwandan forces.
With a total investment of US$20 billion (1.2 trillion meticals), the project is expected to produce up to 12.8 million tonnes of liquefied natural gas per year. The official lifting of the force majeure is dependent on final approval of financing and institutional guarantees — including that of the US ExIm Bank, which has already revalidated a loan of US$4.7 billion — and other commitments from the United Kingdom and the Netherlands.
Interest rate drops to 18%
The Mozambican Banking Association (AMB) announced a reduction in the prime rate to 18% in May. This is the sixth cut in the last seven months, reflecting positive signs in the inflation trajectory, and follows the recent decision by the Bank of Mozambique to reduce the MIMO rate to 11.75%.
The rate cut is intended to boost access to credit in a still fragile but promising environment. However, the Monetary Policy Committee warned of worsening fiscal risk, which could offset the benefits of monetary easing. The Committee’s next meeting, scheduled for 28 May, will be decisive in setting the course of monetary policy in the short term.
Government raises minimum wage amid criticism
On the eve of International Workers’ Day, the government approved an adjustment to the minimum wage for eight sectors of activity, with increases ranging from 150 to 1,820 meticals, with retroactive effect from April. The measure was presented as a possible solution to the current economic situation, rather than a response to the expectations of trade unions.
The OTM-CS, the country’s largest trade union, considered the increases insufficient. Secretary-General Damião Simango pointed out that the lowest minimum wage covers only 11% of the basic basket valued at 40,000 meticals. Even the highest wage does not exceed 40%, revealing, according to the union leader, the gap between legal income and the real cost of survival for Mozambican families.
IMF demands reforms to avoid fiscal collapse
The International Monetary Fund issued a clear warning during the Economic Briefing organised by the CTA: Mozambique needs urgent reforms to avoid the collapse of public finances. The Fund’s representative, Olamide Harrison, pointed out that public debt is already around 100% of GDP and interest payments absorb 4.5% of national wealth.
The budget deficit stood at 6.4% in 2023, and delays in payments to suppliers have become recurrent. The IMF recommends structural measures such as wage restraint, elimination of unjustified tax exemptions, strengthening of tax administration and greater exchange rate flexibility to improve external competitiveness and restore investor confidence.
2025 budget forecasts deficit of US$1.9 billion
The Council of Ministers this week approved the proposed Economic and Social Plan and State Budget (PESOE) for 2025, which forecasts a deficit of 126.8 billion meticals (US$1.9 billion). The total budget is estimated at 512.7 billion meticals, with expected revenues of 385.8 billion, revealing a strong dependence on external financing.
According to government spokesman Inocêncio Impissa, the new executive is operating with inherited resources and faces enormous constraints. The 2024 General State Account reveals that public debt reached 1.1 trillion meticals (17 billion dollars), corresponding to 76.9% of GDP. Revenue collected was 10% below target, further exacerbating pressure on the Treasury.
Source: Felisberto Ruco
