Public sector wages and debt servicing consume almost 90% of the Mozambican state’s revenue, a situation the Government aims to reverse through reforms designed to increase tax revenue from 17% to 26.2% of GDP by 2035.
Civil service wages and debt servicing continue to constrain the Mozambican state’s financial capacity, according to the assessment underpinning the 2026–2035 Public Finance Management Strategy (Estratégia de Gestão das Finanças Públicas, EGFP), a document recently approved and to which Lusa gained access on Thursday.
These two expenditure categories (wages and debt) “absorb around 90% of the state’s revenue, which leaves no scope for public investment or for the expansion of priority social and economic policies,” the document adds.
The document identifies fiscal sustainability as one of the main challenges of the coming decade, advocating an increase in domestic revenue, a reduction in dependence on external financing and a more efficient use of public resources.
The strategy also highlights the deterioration in public debt indicators in recent years, with the stock of debt recording «exponential growth between 2020 and 2025, rising from 30% to 43%, as a result of the increase in domestic debt».
To address these constraints, the Government has set a target of raising tax revenue from the current 17% to 26.2% of Gross Domestic Product (GDP) by 2035 and reducing the present value debt ratio from 76% to 40% of GDP.
To this end, it envisages a reform based on broadening the tax base, the gradual integration of the unofficial economy, the taxation of digital activities and a review of tax benefits and incentives.
The Government plans to strengthen tax enforcement and increase the digitalisation of revenue collection, aiming to raise the proportion of taxpayers who fulfil their tax obligations via the Tax Authority’s electronic platforms from 30% to 85%.
Another key area is the generation of revenue from natural resources, including mining, oil and natural gas activities, as well as emerging mechanisms linked to carbon credits, biodiversity and environmental services.
One of the new features of the strategy is the gradual introduction of green taxation, which will be included in the forthcoming reform of climate finance.
“The introduction of green taxation will enable the mobilisation of domestic resources to support climate adaptation and mitigation, as well as the energy transition,” the document states.
The strategy provides for the progressive adoption of fiscal instruments based on the ‘polluter pays’ principle, the creation of green tax incentives and the implementation of green budget labelling systems to identify public expenditure associated with combating climate change.
The reform is intended to integrate climate considerations into the tax system and the budgetary cycle, whilst also providing for the gradual introduction of green taxation, the development of incentives for sustainable investment and the strengthening of disaster risk financing through the Disaster Management Fund.
The strategy also advocates the development of green financial instruments, including green bonds, guarantees and credit lines for climate adaptation and mitigation projects, as well as strengthening the country’s capacity to mobilise international climate finance.
In addition to mobilising domestic revenue, the Government plans to continue prioritising external financing on concessional terms and to strengthen public debt management mechanisms, seeking to reduce the risks associated with interest rates, refinancing and exchange rates.
The strategy maintains that fiscal consolidation will be crucial to reducing dependence on external financing, creating scope for public investment and supporting the economic transformation set out in the country’s development plans.
Source: Lusa