Mozambique: Implementation of the TSU “was more costly than expected” – IMF

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Mozambique: Implementation of the TSU “was more costly than expected” – IMF

3:45 CAT | 25 Jan 2024

File photo: TVM

The implementation of the Single Salary Scale (TSU) in Mozambique, strongly contested by several sectors of the public service, cost around 28.5 billion meticais (€410 million). “The June 2022 implementation of the Tabela Salarial Única – TSU (single salary scale)— was more costly than expected,” the International Monetary Fund (IMF) says.

“The expected initial cost of the wage bill reform over the period 2022–23 was MT19.2 billion (1.4 percent of GDP), however, the implementation of the TSU ended up being MT28.5 billion (2.1 percent of GDP),” an IMF document evaluating Mozambique’s assistance program states.

The IMF, which defends the need for this measure, explains that “this overrun” in implementation costs was “was due primarily to difficulties” in implementing “a complex wage bill reform”, including “incorrect mapping of public servants to the new pay scale”.

“Underestimating the cost of the TSU,” led to “insufficient wage bill saving measures to meet the cost,” reads the report.

“The additional cost was about 2.5 percent of GDP in 2022. The fiscal slippage was financed primarily through expensive domestic financing,” the document warns.

The IMF emphasizes that the reform is “aimed at improving the predictability of wage bill spending” by “unifying the salary scales and streamlining supplementary pay” among the various classes and areas of the public service.

It also states that over the last decade, the civil service wage bill in Mozambique “has increased from 10 percent of GDP in 2017, to 17 percent of GDP in 2022”, growth “driven primarily by salaries rather than hiring”.

“Since 2016, average compensation for employees has grown three times as fast as GDP per capita, whereas the growth in public sector employment has lagged population growth,” the IMF concludes.

The TSU, approved in 2022, defines and harmonizes rules and criteria for setting remuneration for public services, holders and members of Public Bodies and the Administration of Justice, “with the main objective of decompressing the salary mass to levels in line with the budgetary sustainability, thus creating fiscal space to meet other types of expenses, such as investment”, the government previously explained.

“However, given the need to bring the impact figure to the initially predicted level, the Government has been implementing additional measures,” reads the budget proposal for 2024, which gives as examples the audit of employee payrolls and state agents, civil and military, the review of leadership, representation and location allowances, the retirement process of around 25,278 state employees and agents and the “rationalization of new admissions”.

“These measures essentially aim to reduce the overall impact of the policy to approximately that predicted at the time of its implementation,” the government adds.

It also states that “as a result of the exercise” to “reduce the weight of the wage bill and other personnel expenses”, these measures are set at more than 199,375 million meticais (€2,878 million) in the 2024 budget, the equivalent to 13% of GDP, one percentage point less than in the previous year.

With the implementation of the TSU, the government states that it hopes to “improve its salary and remuneration expenditure programming processes”, lowering the wage bill ratios from the previous 15% of GDP to 14.4% last year and 12.5% in 2024, “in line with international and regional parameters”.

The implementation of the new salary scale in the public service is being strongly contested by various professional classes, such as doctors and teachers, with a record of salary delays and cuts in security forces criticised by various segments of the Mozambican state apparatus.

Approved in 2022 with the aim of eliminating asymmetries and keeping the state wage bill under control in the medium term, its launch caused salaries to soar by around 36%, from 11.6 billion meticais/month (€169 million) to 15.8 billion meticais (€231 million).

The new salary matrix in the State has 21 levels, from 8,756 to 165,758 meticais (€134 to 2,580 euros), instead of 103 levels, as previously.

Source: Lusa