Mozambique: IMF Reveals 93% of State revenue goes to salaries and debt payments

Login

Register

http://www.clubofmozambique.com/

Mozambique: IMF Reveals 93% of State revenue goes to salaries and debt payments

11:22 CAT | 30 May 2024

File photo: Carta de Moçambique

The Government of Mozambique allocates 73% of its tax revenue to paying salaries of public sector employees. This situation could jeopardize the continued support from the International Monetary Fund (IMF).

Near the end of his mission in Mozambique, the IMF’s Resident Representative made startling revelations this Wednesday. He stated that out of the total public revenue collected by the Government, 73% is used to pay public sector salaries and 20% is allocated to servicing public debt.

“73% is used for recurring expenses. These are not investment expenses, they are not spent on infrastructure, they are not used for personnel development, and they do not improve the diversification of the economy. This is everything we talk about that is necessary to boost growth and the country’s per capita income. It’s important to remember that these resources are used by 3% of the employed population, which are public employees. This 3% captures 73% of the tax revenue,” revealed Alexis Meyer Cirkel, IMF Resident Representative in Mozambique.

This situation renders public expenditure unsustainable, leaving almost nothing after paying public sector salaries and public debt.

“The wage bill is obviously unsustainable as it practically absorbs all fiscal revenue. If we look at it, with 73% of tax revenue plus 20% paid on debt, there’s only about 7% to 8% left for public investment needs, building schools, roads, and paying for goods and services in the business sector. This composition does not seem right. What is the right composition? This is generally defined in the State Budget,” explained Alexis Meyer Cirkel.

Comparing Mozambique’s situation with Sub-Saharan Africa highlights the issue further. “It’s always good to compare with the region. In neighboring countries, Zimbabwe spends about 37.8% of its tax revenue on salaries, Tanzania 35%, Angola 31%, the SADC average is around 50%, and the Sub-Saharan African average is slightly above 50%,” he noted.

In light of this situation, the IMF recommends that the Government comply with the law. “Our recommendation is to bring the wage bill in line with what was agreed upon at the end of last year under the State Budget law. If this does not happen, we see significant risks to the sustainability of wage expenses and fiscal sustainability,” suggested the IMF representative in Mozambique.

Due to the violation of the budget law, the IMF indicates that it will be challenging to continue supporting the country in economic recovery, good governance reforms, public finance management, among other aspects.

“The excesses beyond what was budgeted, especially regarding the wage bill, concern us greatly. As I mentioned, this could undermine the ability to proceed with the current review,” Alexis Meyer expressed with concern.

These data are part of the IMF report on Economic Outlook for Sub-Saharan Africa and Mozambique, presented yesterday in Maputo, in front of journalists, managers of public and private entities, economists, and others.

Alexis Meyer Cirkel, whose mission ends in August, highlighted some of the country’s biggest problems. His successor will start on September 1st.

Source: O Pais