Mozambique: State cuts spending, but salaries and debt continue to strain budget

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Mozambique: State cuts spending, but salaries and debt continue to strain budget

3:44 CAT | 06 Oct 2025

File photo: TVM

Mozambique’s state expenditure in the second quarter fell by 4% compared with the same period in 2024, but the Ministry of Finance warns that rising salaries and public debt are placing pressure on budgets, amid “weak” mobilisation of internal revenues.

In its latest fiscal risk monitoring report, obtained by Lusa today, the Ministry of Finance states that public spending “has experienced adverse dynamics in the recent period, reflecting structural rigidity and pressures on the State Budget.”

It adds that budget execution in the second quarter shows that, on a year‑on‑year basis, state expenditure fell by 4%, equivalent to 3,800 million meticais (about $59.4 million).

“It is notable that the greatest pressures were observed in the items for personnel and public debt charges, accounting for 52% and 11% respectively of the total expenditure in the quarter, meaning an increase of 12% in the wage bill and 25% in debt charges compared to the same period,” the report states.

The document also acknowledges that in the “short term it is expected that pressure on state expenditure will remain high,” given the “weak capacity to mobilise domestic revenue, as well as the impacts arising from the relaxation of various support programmes to the State Budget and development by international partners.”

“This context imposes additional challenges on fiscal sustainability, requiring greater rigour in public account management, in the setting of budgetary priorities, and reinforcement of fiscal discipline,” it reads.

The Mozambican government estimates that in 2026 the fiscal deficit will exceed 6% of GDP, assuming as priorities the “control of the wage bill” and “stabilisation of the State debt burden.”

“We must ensure a balance between the need to consolidate public accounts so as to stabilise debt indicators, thus freeing budgetary space to meet productive investment needs. But this consolidation effort must also not neglect the need to allocate resources toward investment to allow the economy to continue growing,” said, on 26 September, the Secretary of State for the Treasury and Budget.

Amílcar Tivane presented to partners the outlooks of the proposed Economic and Social Plan and State Budget (PESOE) for 2026 at the Central Development Observatory in Maputo, acknowledging that international shocks and geopolitics condition Mozambique’s forecasts.

“To address these challenges, we will continue to work on rationalising spending, and two cornerstones of this process are controlling the wage bill and stabilising debt charges,” he explained, also acknowledging that expenditure represents a “critical domain” of the PESOE for next year.

“For 2026 we plan a budget with a level of expenditure around 32% of GDP, state revenues around 28% of GDP and a fiscal deficit around 6% of GDP,” the Secretary of State enumerated, assuring that the difference will be funded by grants, internal and external borrowing, but with “greater restraint, to minimise risk.”

Earlier, the government had projected a 2025 deficit of 5.6% of GDP.

Amílcar Tivane also detailed that budgetary policy objectives for 2026 “will continue to revolve around the need to strengthen credibility and fiscal transparency,” as well as “to implement or accelerate a set of reforms to boost revenue collection.”

Concerning public debt management, he said the strategy will “continue to prioritise portfolio management,” through “passive management operations, debt swaps and, at the limit, reducing the volume of public debt financing,” to “create conditions for the country’s risk premium indicators to improve.”

Source: Lusa