Municipalities’ debt increased to around 1.3 billion meticals (20.7 million dollars) between 2019 and 2022, due to non-compliance with repayment plans, according to the Fiscal Risks Report from the Ministry of Economy and Finance (MEF). The document highlights that, with the exception of the municipality of Matola, the other 18 municipalities that took out multi-annual loans defaulted on their financial commitments during the period analysed, according to the newspaper O País.
According to the MEF, failure to pay debts as planned threatens the financial sustainability of municipalities. In the period in question, total debt increased by 10 per cent, driven mainly by debt to suppliers, which grew by 159.8 per cent.
This type of debt, which represents 62.5 per cent of the total, is singled out as the main concern by the report.
Despite a 53 per cent increase in municipalities’ own revenues, the report indicates that their financial dependence on the government remains high, at 44 per cent.
This growth in revenue was largely influenced by the performance of the municipality of Maputo, which, on average, accounted for 40% of the own revenue of the 18 municipalities analysed during the 2019-22 period.
The fiscal risks associated with municipalities, according to the MEF, can jeopardise the country’s fiscal sustainability and economic stability. These risks are manifested in high expenditure, low revenue collection, budget deficits and excessive indebtedness, which calls for urgent measures to ensure the financial stability of Mozambican municipalities.
The report also emphasises the need to strengthen the financial management of municipalities and to adopt policies that reduce their dependence on the central government, thus promoting greater long-term economic sustainability.
