The Mozambican government said on Tuesday (27) that the country’s rating downgrade was due to pressure caused by the State’s salary reform. The problem has since been corrected, thus maintaining conditions to meet debt service.
“The recent assessment of the country’s rating was based on a retroactive framework, particularly in the first few months of the year, a period in which the impact of the salary reform was very high,” the Minister of Economy and Finance, Max Tonela, said in a joint interview with several international media outlets.
He expected that, “as of July the accounts will be back on track, according to the projections,” noting that the government’s capacity to comply was solid, due to corrections to the flaws detected in the Single Wage Table (TSU).
Last week, financial rating agency S&P downgraded local currency commercial debt issues to default, due to late payments between February and May 2023.
The agency then put the rating at a level below where it was before the temporary default.
“For this year, we have, from the point of view of repaying principal and interest,” with internal and external debt, resources valued at US$1.5 billion and, “at this point, US$764 million has already been paid by the State,” Max Tonela added.
The financial package already disbursed to service debt amounts to 48 percent of the projected costs for this year under this heading, the minister noted, adding that, “the government already has the conditions to continue to meet its obligations with internal and external creditors.
As well as corrective measures in salary reform, he said, the government was also focused on diversifying spending sources.
According to the minister, “before this reform, there were over 100 different salary scales within the public framework of the Mozambican state and there was a differentiation between the salaries of officials who were in the most direct administration of the state (ministries and provincial governments), which were different from those of the indirect administration of the government.
The Minister of Economy and Finance also noted that the country’s economy was following the growth trend that had been seen since last year, and that the Gross Domestic Product was expected to reach 5 percent this year, after 4.1 percent in 2022.