Maputo, 30 Sept (AIM) – The Budget Monitoring Forum (FMO), a consortium of Mozambican non-governmental organizations, calls for a Debt Management Strategy, given that the government’s current proposal reduces fiscal space for development in favor of public debt service.
The government’s position is part of the Economic and Social Plan and State Budget (PESOE -2027) proposal, which foresees total expenditure of approximately 496.6 billion meticais (7.8 million US dollars at the current exchange rate), with 72.5 percent allocated to operating costs, 16.0 percent to investment, and 11.5 percent to financial operations.
Recently, the government approved the amendments to regulations governing Corporate Income Tax (IRPC), Value Added Tax (VAT) and Personal Income Tax (IRPS) in line with PESOE-2027 proposal.
FMO believes that the government’s proposal favors public debt service and reduces fiscal space for development as “it projects 50.261 billion meticais in debt charges, 48.675 billion meticais in principal repayments, and 98.932 billion meticais in total debt service, equivalent to approximately 5.4 percent of Gross Domestic Product (GDP).”
“However, projected investment expenditure is approximately 79.567 billion meticais (4.4 percent of GDP), which means that debt service is approximately 24 percent higher than the total public investment expenditure projected for the same year. This comparison highlights a fiscal space problem; resources that could fund infrastructure, health, education, water, agriculture, and economic development are increasingly constrained by debt-related obligations”, reads the document.
According to the organization, discipline is crucial for restoring fiscal space “but it is also necessary to protect social sectors, especially health, education, social protection, water and sanitation, agriculture, and youth employment.”
“Discipline must not come at the expense of social and productive investment. If only about 16 out of every 100 meticais of public expenditure are allocated to investment, it is necessary to demonstrate how the budget structure will enable the financing of the economic and social transformation that PESOE itself aims to achieve”, reads the statement.
In order to reverse the situation, FMO calls for a Debt Management Strategy “explicitly aligned with development priorities, demonstrating the expected debt service trajectory, the composition of domestic and external debt, and associated costs and risks.”
Am/
