At least 80 per cent of the revenue collected by municipalities is used to pay salaries and wages, revealed a fiscal risk assessment carried out by the Ministry of Economy and Finance (MEF). This scenario has limited the financial availability for investment in development projects in areas of municipal competence, according to the newspaper Noticias.
According to the document, which analysed the years 2019-22 and presents forecasts for 2025, this high allocation of resources to personnel expenses reflects the significant dependence of municipalities on transfers from the central government. Without this support, the ability to carry out operating and investment expenditure would be even more jeopardised.
The evaluation details that, when taking into account the financial compensation transferred by central government, the weight of spending on salaries is reduced to 47 per cent. This support is considered fundamental to allow municipalities greater room for manoeuvre in their financial operations and to promote the sustainability of their finances.
‘The report also points out that municipalities’ own revenue represents, on average, 43 per cent of their total expenditure, which demonstrates a significant degree of dependence on external sources”
The report also points out that the municipalities’ own revenues represent, on average, 43 per cent of their total expenditure, which demonstrates a significant degree of dependence on external sources. During the period in question, government transfers and own revenue made up around 44 per cent of total municipal revenue, with the remainder coming from other sources.
Another factor contributing to the pressure on municipal finances was the 20 per cent increase in expenditure recorded between 2019-20 due to the extraordinary needs caused by the covid-19 pandemic. This additional pressure has further hampered the investment capacity of municipalities, which have had to channel a considerable part of their resources into dealing with the health crisis.
Despite these challenges, the MEF underlines the continued efforts of municipalities to maximise the collection of their own revenues. Between 2019-22, the aggregate revenues of the 18 municipalities analysed grew by 53%, driven mainly by the municipality of Maputo City, which alone accounted for 40% of total municipal revenues.
The report concludes that although the financial situation of the municipalities shows signs of improvement, their long-term sustainability will continue to depend on a combination of efforts to optimise the collection of their own revenues and continued support from the central government.
