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IMF Warns Overspending on Salaries Threatens Mozambique Programme

IMF Warns Overspending on Salaries Threatens Mozambique Programme

The International Monetary Fund (IMF) warned today that Mozambique’s excessive public spending, specifically on salaries, could jeopardise the programme that the institution has agreed with the African country.

‘We are concerned about this situation. A letter was sent yesterday [Tuesday] from the Africa Department [of the IMF] to the government, mentioning this difficulty, this concern about excesses and spending above the limit,’ said the representative of the international financial institution in Mozambique.

Alexis Meyer-Cirkel was speaking during the presentation of the report ‘Economic Outlook for Sub-Saharan Africa and Mozambique’.

These ‘excesses’ in public spending ‘call into question sustainability and the programme with the government,’ he stressed.

The IMF, he continued, is very concerned about the excessive wage bill, which currently absorbs 73 per cent of the revenue collected by the Mozambican state.

‘This is not ideal, in no country is this a sustainable policy in the long term,’ emphasised the IMF representative in Mozambique.

Alexis Meyer-Cirkel pointed out that the portion of public resources currently earmarked for salaries takes away resources that could be channelled into 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, which is the proportion of state workers in relation to the Mozambican population, he said.

The IMF representative emphasised that the volume of public revenue used to pay state salaries in Mozambique is above the average for countries in the Southern African Development Community (SADC) and sub-Saharan Africa.

Alexis Meyer-Cirkel said that the high wage bill in the state is not necessarily related to an excess of civil servants, but admitted that it could be related to increases caused by new frameworks created under the reform introduced by the Single Salary Table (TSU).

On the positive side, he said that Mozambique had made progress in terms of structural reforms such as the approval of a law creating the sovereign wealth fund, the revision of the Public Probity Law and a rule on the beneficial owner, as well as the lowering of the inflation rate to one digit.

The IMF recently warned that Mozambique needs to deepen fiscal consolidation, rationalising spending on the wage bill and prioritising social spending, in order to guarantee fiscal and debt sustainability.

‘Further fiscal consolidation is needed in 2024 to ensure fiscal and debt sustainability and preserve macroeconomic stability,’ said IMF team leader Pablo Lopez Murphy at the end of a visit to Mozambique, emphasising that ‘the challenges in implementing the new single wage scale have resulted in an expenditure overrun (….) that has made important priority spending impossible, including social transfers and infrastructure’.

Therefore, he continued, ‘rationalising spending on the wage bill must be the basis of fiscal consolidation, social spending must be prioritised, and debt management must be strengthened to avoid payment delays.’

See Also

The IMF’s financial adjustment programme in Mozambique was approved in May 2022 and provides for total funding of 456 million dollars (416.2 million euros), of which 273 million dollars (249.2 million euros) have already been disbursed in the first three assessments of the programme.



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