IMF wants to cut public sector wage bill
A staff team from the International Monetary Fund (IMF) which visited Mozambique from 24 April to 5 May, says it held “constructive and fruitful discussions with the Mozambican authorities”, on the Second Review under the Extended Credit Facility (ECF) arrangement, but is insisting on cutting public sector wages.
A statement issued by the team leader, Pablo Lopez Murphy, said “Mozambique’s economic recovery has gained momentum. Sectors most impacted by COVID-19 (hospitality, transport, and communications) have rebounded, and agriculture has benefited from favorable rainfalls”.
He claimed that economic growth in 2022 stood at 4.1 percent and is projected to rise to 5 percent in 2023. “The pick-up in growth is partly driven by extractive industries, including the first liquefied natural gas (LNG) project (Coral South) which began production in October 2022”, he added.
Lopez Murphy described annual inflation as “moderate”, at 9.3 per cent in March “reflecting frozen fuel prices and lower-than-expected second-round effects of food and fuel price increases. The exchange rate has been stable since mid-2021, which helps contain inflation”.
He said “Fiscal performance in 2022 was weaker than expected, with the primary deficit (after grants) about ½ percent of GDP above the projected target—reflecting a significant overrun (of three percent of GDP) in the cost of implementing the wage bill reform. Lower spending on other goods and services offset part of the wage bill overshoot, such that total current expenditure exceeded projections by about 1 percent of GDP”
“Revenue was about one per cent of GDP lower than planned, reflecting lower than expected taxes on goods and services (especially VAT)”, he continued. “The government has already undertaken several measures towards correcting the wage bill slippages, including changes to the reference wage and salary supplements, and auditing the process of mapping public employees from their original salary level to their new salary level.
The IMF remains obsessed with cutting public sector wages. Lopez Murphy said the IMF staff “encourage the government to proceed with additional measures to reduce the annual wage bill to its approved budget level”.
He claimed that “Ensuring that the public wage bill is brought down is critical for safeguarding fiscal and macro sustainability”.
(AIM)
