Mozambique: State revenue up 15% in H1, spending up more

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Mozambique: State revenue up 15% in H1, spending up more

10:33 CAT | 14 Aug 2024

File photo: Banco de Moçambique

Revenue collected by the Mozambique state in the first half of the year grew by 15% compared to the same period in 2023, to almost 168.9 billion meticais (€2.4 billion), but below the growth in expenditure.

According to budget execution data for the first six months of the year, state revenue collection in this period reached 44% of the target set by the government for 2024. In the same period of 2023, this revenue represented 41% of the forecast for the whole year and then totalled 146.8 billion meticais (€2.09 billion).

In terms of expenditure, the Mozambican state spent 226.52 billion meticais (€3.225 billion) in the first half of the year, equivalent to 39% of what was stipulated for the whole year, essentially on salaries. This is an increase of almost 16% compared to expenditure in the same period of 2023, which was 195.646 million meticais (€2.786 million), a realisation of 41.4% of the budget for the whole of last year.

The data is included in the balance of the Economic and Social Plan and State Budget for the first half of 2024, analysed on Tuesday at a cabinet meeting in Maputo.

“Of the 128 indicators assessed, 83% performed positively, 75 indicators met the targets, and 31 partially met them, and 17% – 22 indicators – performed negatively,” the cabinet spokesman, Filimão Suaze, said yesterday at the end of another weekly meeting of the Council of Ministers.

In July, the International Monetary Fund (IMF) recognised that reducing spending on Mozambican civil service salaries was “more difficult than expected”, warning of the “heavy burden” on public finances.

“Reducing spending on the wage bill has been more difficult than expected,” said an IMF report on the fourth evaluation of the Extended Credit Facility (ECF) programme, concluded in July and previously reported by Lusa, which pointed to “problems” in the “implementation of a single, complex salary scale”.

The IMF pointed out that these difficulties in implementing the reform resulted in slippages of 3.3% of GDP in 2022. In 2023, the wage bill fell to 15.1% of GDP, down from 16.1% in 2022, but remained above the budget limit set at 13.8% of GDP.

“Expenditure on the wage bill represents a heavy burden on public finances – equivalent to 72% of tax revenues in 2023,” warned the IMF document, pointing out that this volume of expenditure limits state spending on social support and other development needs.

“Although determined actions have helped to reduce the wage bill by 1.3 percentage points of GDP in 2023, this has fallen short of the planned reduction of three percentage points planned in the 2023 Budget, partly due to pressures to increase subsidies in the health sector,” it said.

On the other hand, the IMF recognised that the Mozambican authorities “are struggling to meet social spending targets”. In 2023, social spending was only 36% of the budget allocation, equivalent to 0.2% of GDP, and “lower than the 0.5% average “of the last three years”.

“The authorities are exploring options to create fiscal space for social spending and improve execution efficiency, including digital payments using mobile money,” the IMF noted in the report.

The institution had already warned on 29 May that the increase in Mozambique’s payroll could jeopardise fiscal sustainability, with the risk of the country exceeding the budget law by around €175 million this year.

In response, Mozambique’s government made a commitment to the IMF at the end of June to eliminate 5,000 “ghost” workers in the civil service in the coming months, one of the measures to contain expenditure on the wage bill, as well as to “remove from the payroll all employees who receive salary and pension payments simultaneously”, in addition to “reducing the seniority supplement by 50% across the public sector”, in this case “excluding magistrates and doctors”.

Source: Lusa