IMF defends 2 to 5.5% wage increases in 2019 in Mozambique

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IMF defends 2 to 5.5% wage increases in 2019 in Mozambique

1:06 CAT | 06 Aug 2018

Head of the International Monetary Fund (IMF) mission to Mozambique Ricardo Velloso (left) with Ari Aisen Resident Representative, in Maputo. Photo: Notícias

The International Monetary Fund (IMF) in Maputo this Friday defended wage increases of 5.5 percent for Mozambicans with lower wages and 2 percent for those earning higher wages in 2019.

“In our view, it would be prudent to give an increase below projected inflation, maybe 5.5 percent for workers who earn less and 2 percent for workers who have the highest wages,” IMF head of mission to Mozambique Ricardo Velloso said at a press conference in Maputo at the end of a visit to the country.

Velloso said that the wage increase in 2019 should be in line with the inflation forecast, which is 5.5 percent, and the need to contain the expansion of the wage bill, noting that, at 11 percent, the country had the highest GDP-to-wages ratio in Southern Africa.

“The burden of the wage bill must decrease. This can open the necessary space for financing the private sector and spending in priority areas,” Velloso said.

Other ways for the Mozambican government to control expenditure, he continued, were the rationalisation of hiring and the reallocation of employees to areas with staff shortages.

Velloso welcomed the proposal that the executive hire just two, or even just one worker, for every three workers who retire, as part of the expenditure control effort.

The IMF is providing technical support to Mozambique, that has been facing an economic crisis since 2016, caused by the combined effect of natural disasters, falling commodity prices in the international market and the discovery of undeclared loans to public companies of more than of two billion Euros.

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Source: Lusa