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Government Sets Wage Limit at 12.4% of GDP

Government Sets Wage Limit at 12.4% of GDP

The government has announced the introduction of a new fiscal measure that will come into force from 2025, aimed at limiting spending on salaries to a maximum of 12.4 per cent of Gross Domestic Product (GDP). Known as the “debt brake”, this initiative aims to control the growth of public spending based on the evolution of domestic public debt, according to the newspaper Noticias.

According to the guidelines established by the Ministry of Economy and Finance, the reform stipulates that salaries and wages paid by the state may not exceed the limits set in relation to the average growth of nominal or real GDP. “By 2025, the aim is for spending on salaries not to exceed 12.4 per cent of GDP, with a further reduction planned to 10.6 per cent by 2027,” reads the note.

The implementation of this policy will be adjusted according to the level of public debt: above 30 per cent of GDP, spending growth will be strictly limited; between 15 and 30 per cent, additional restrictions will be applied; and below 15 per cent, allowing a greater margin for expansion. The government emphasises that this approach aims to align the growth of public spending with the economy’s financing capacity, promoting sustainable and balanced economic development in the southern African region.

The fiscal scenario for the 2025-27 period was approved on 11 June by the Council of Ministers. This measure, according to the Executive, aims to guide fiscal policy towards the implementation of the government’s Five-Year Programme, emphasising the diversification of sources of funding for the State Budget and the consolidation of public spending. Ludovina Bernardo, spokesperson for the Council of Ministers, explained that the 2025-27 fiscal scenario also points to greater control of fiscal risks and the promotion of economic growth, with the aim of stabilising domestic debt.

According to the Economic Situation and Inflation Outlook report released in May by the central bank, Mozambique’s domestic public debt totalled 364.2 billion meticals, representing an increase of approximately 50.9 billion meticals in five months.

Lusa previously reported that the domestic public debt, excluding loan contracts, leases and outstanding liabilities, increased by around 51.9 billion meticals between December 2023 and May 2024.


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