The International Monetary Fund (IMF) revealed on Thursday 18 July that Mozambique has pledged to pay a third of the 13th month to civil servants this year and in the coming years only pay half the amount.
In a letter sent to the IMF’s managing director, Kristalina Georgieva, the country’s leaders clarified that a medium-term action plan had been approved to help reduce the wage bill to 10 per cent of the Gross Domestic Product (GDP).
The document signed by the Minister of Economy and Finance, Max Tonela, and the Governor of the Bank of Mozambique, Rogério Zandamela, added that some political measures will be implemented.
‘There will be limits on hiring, a freeze on nominal salaries and promotions, as well as reforms in the management of public finances,’ it described.
In 2023, Mozambican President Filipe Nyusi announced in Parliament that 30 per cent of the 13th month’s salary for that year would be paid to civil servants, justifying that the decision was taken on the basis of the complex situation the country was going through.
‘Despite the immense financial difficulties we are facing, my government has decided to allocate, for 2023, the payment of the 13th salary, which corresponds to 30 per cent of the basic salary, between January and February,’ he said at the time.
In May, the IMF warned that Mozambique’s excessive public spending, specifically on salaries, could jeopardise the programme that the institution had agreed with the country.
‘These excesses in public spending call into question sustainability and the programme with the government,’ he stressed, noting that ‘the IMF is very concerned about the excess of the wage bill, which currently absorbs 73% of the revenue collected by the state. This is not ideal. In no country is this a sustainable policy in the long term,’ emphasised the IMF’s representative in Mozambique, Alexis Meyer.
Meyer pointed out that the portion of public resources currently earmarked for payroll takes away resources that could be channelled towards investment spending and improving the diversification of the economy. ‘The amount allocated by the state to salaries means that 73 per cent of revenue goes to 3 per cent of the population, the percentage of state workers in relation to the Mozambican population,’ he said.
At the beginning of the 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.
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.
‘There will be limits on hiring, a freeze on nominal salaries and promotions, as well as reforms in the management of public finances’
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 wage bill expenditure 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 Mozambique with total funding of 456 million dollars.
