The International Monetary Fund (IMF) has revealed that the government has pledged to eliminate 5,000 ‘ghost workers’ from the civil service in the coming months, as one of the measures to contain wage bill spending.
According to a Bloomberg publication, the government aims to reduce the amount it spends on civil servants to 10 per cent of Gross Domestic Product (GDP) by 2028.
‘The Ministry of Economy and Finance has a plan underway to contain the wage bill, including freezing salaries in 2024 and 2025 and other corrective measures, such as removing from the payroll all employees who receive a salary and pension simultaneously, as well as reducing the seniority supplement by 50% across the public sector,’ explains the financial institution, quoted on Wednesday 17 July.
The Fund recalled that salary costs absorb 72 per cent of tax revenues, which is why the government should speed up the retirement of civil servants who reach the age of 60.
In April, the IMF issued a warning about the negative impact of Mozambique’s growing wage bill on the country’s fiscal sustainability, arguing that there was ‘a significant risk that spending on public salaries will exceed the 2024 budget law by approximately 12 billion meticals (188.1 million dollars)’.
At the time, the organisation said that this increase could jeopardise the country’s financial stability, which has already been facing budgetary challenges since 2022, stressing that excessive spending on public salaries is a growing concern, given that in 2022-23 there was a considerable increase that could be repeated this year.
Earlier this month, the International Monetary Fund guaranteed that it would immediately disburse another 60 million dollars (3.7 billion meticals) in support to Mozambique, under the country’s assistance programme.
‘The executive board concluded the regular consultation process with Mozambique for 2024 and the fourth review of the Extended Credit Facility (ECF) agreement 36 months ago, allowing for an immediate disbursement equivalent to 60.03 million dollars usable for budget support, bringing total disbursements to the country to 330.1 million dollars,’ the institution said in a statement.
Salary costs absorb 72 per cent of tax revenues, which is why the government must speed up the retirement of civil servants who reach the age of 60
According to the financial organisation, the three-year ECF agreement aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while promoting higher and more inclusive growth through structural reforms.
The deputy managing director of the International Monetary Fund, Bo Li, recognised that the Mozambican authorities’ efforts to ensure fiscal discipline are welcome.
“Further fiscal consolidation is necessary, given the country’s high debt and tight financing conditions. In this sense, revenue mobilisation and the rationalisation of expenditure on the wage bill are essential to create fiscal space for high-priority social and development spending. Improving the execution of social spending and avoiding future arrears remains fundamental,’ he said.
This programme was approved in May 2022 and provides total funding of 456 million dollars to Mozambique.
