Mozambique’s Surging Wage Bill May Delay IMF Payment to 2025

Mozambique’s next payment from the International Monetary Fund is at risk of being delayed because of the African nation’s ballooning public wage bill, according to a document seen by Bloomberg.

Bloomberg
First Published30 May 2024
Mozambique’s Surging Wage Bill May Delay IMF Payment to 2025
Mozambique’s Surging Wage Bill May Delay IMF Payment to 2025

(Bloomberg) -- Mozambique’s next payment from the International Monetary Fund is at risk of being delayed because of the African nation’s ballooning public wage bill, according to a document seen by Bloomberg.

The gas-rich nation is on course to overshoot its planned spending on civil servants by almost $190 million, according to a copy of a letter from the IMF to Mozambique’s government dated May 28. The 2024 budget provisioned 199.4 billion meticais ($3.1 billion) for public wages this year, equivalent to about 13% of gross domestic product. 

The IMF wants the government to commit “to concrete measures to contain wage bill spending in 2024 to the budget law,” according to a letter addressed to the finance ministry of the southeast African nation. The IMF confirmed the letter, while Mozambique’s finance ministry didn’t immediately respond to an email seeking comment.

Mozambique has until the end of the week to provide the required commitments to the IMF, without which the Washington-based lender won’t be able to conclude its fourth review in time for its board to approve it in July, according to the letter. Any funding delay will add to the struggles of the government, which can’t immediately depend on revenue from a $20-billion natural gas project.

Spending substantially more than budgeted on civil servants in 2022 and 2023 has diverted resources from other areas like social-cash transfers and infrastructure, “and are putting fiscal sustainability at risk,” Alexis Meyer-Cirkel, the IMF’s resident representative in Maputo, said in reply to emailed questions Thursday. “Against that backdrop, the fund is requesting to keep wage bill spending within the limit set in the 2024 budget law.”

The IMF is unlikely to conduct a fresh review before next year should Mozambique fail to the meet terms of the agreement, according to the letter.

Mozambique, which is set to hold general elections on Oct. 9, expects to receive about $60 million, taking the total that the lender has provided the nation under the program to about $334 million. 

The wage bill has been a recurring problem for Mozambique, since it introduced a new pay system for public workers in 2022. Spending has repeatedly surpassed estimates, and public worker strikes have disrupted services, including state health facilities.

TotalEnergies SE froze its liquefied natural gas project in 2021 after insurgents raided the nearby town of Palma, killing more than 800 people.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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