Starting next year, the Mozambican government will implement a fiscal rule aimed at limiting the growth of spending on wages and salaries, based on the evolution of the domestic public debt stock.

This reform aims to restrict the annual increase in spending on wages and salaries to specific levels in relation to the average growth rate of nominal Gross Domestic Product (GDP) or real GDP.

Called Debt BrakeThe measure aims to ensure that wages and salaries paid by the state do not exceed 12.4% of GDP by 2025 and 10.6% by 2027.

A publication by NewsAccording to the report, the reform will be implemented by the government, through the Ministry of Economy and Finance, based on the regulation on the medium-term fiscal scenario set between 2025 and 2027.

"The Executive thus intends to restore fiscal credibility by improving access to financing, especially in a context of high indebtedness and perceived high fiscal risk," the publication reads, stressing that this reduction will be made with a view to adjusting the wage bill to the standard in the southern African region, which is set at eight percent.

In addition, this rule is expected to be crucial for Mozambique to achieve credibility and sustainability, as well as meeting long-term needs in terms of economic growth and social welfare.

The fiscal measure will limit the growth of spending on wages and salaries to no more than two percent of the average growth rate of nominal GDP, in a context where public debt is above 30% of Gross Domestic Product.

If public debt is set between 15 and 30%, expenditure growth will be limited to five percent above the average growth rate of nominal GDP or zero of average real growth.

If public debt is below 15% of GDP, expenditure growth could be up to 6.5% above the average nominal GDP growth rate.

This approach will control the expansion of public spending, ensuring that its growth remains in line with the economy's financing capacity.

In December of last year, the Mozambican government admitted that the reform of the Single Salary Table (TSU) in the Civil Service, which began to be implemented in 2022, had "higher costs than estimated", stressing that it will go ahead with a program of cuts in order to reduce spending.

"In addition to a package of corrective measures of around 1% of GDP (made up of measures to reduce revenues and the wage bill), we have approved a medium-term action plan to help reduce the wage bill to 10% of GDP," says a letter sent to the International Monetary Fund (IMF), signed by the Minister of Economy and Finance, Max Tonela, and the Governor of the Bank of Mozambique, Rogério Zandamela.

The document was addressed to the IMF's managing director, Kristalina Georgieva, dated December 19, in which the Executive states that the plan adopted includes political measures, namely "limits on hiring, a freeze on nominal salaries and promotions and the payment of half of the 13th salary between 2025-2028".

(Photo DR)