IMF: Implementation of the Single Wage Scale in Mozambique Exceeded Expected Costs

The implementation of the Single Wage Table (TSU) in Mozambique cost around 28.5 billion Meticais, “more than expected”, due to the “incorrect mapping of civil servants”, according to the International Monetary Fund (IMF), in its third assessment of the technical and financial assistance program for Mozambique.

The calculations point to spending in the order of nine billion Meticais more than projected, since the initial expected cost of reforming the wage bill over the 2022-2023 period was 19.2 billion Meticais (1.4% of GDP). Thus, the implementation of the TSU ended up costing 28.5 billion Meticais (2.1% of GDP).

The organization explains that the cost overruns were due to the difficulties caused by the “complex reform of the wage bill”. This complexity led to an “incorrect mapping of civil servants to the new salary scale, underestimating the cost”, according to the IMF.

“The wage saving measures were insufficient to meet the costs. The additional cost was around 2.5% of GDP in 2022. The fiscal slippage was financed mainly through expensive domestic resources,” warns the IMF in the same document.

It should be remembered that the Single Salary Scale was the result of an IMF recommendation to “improve the predictability” of the wage bill and spending by “unifying salary scales and rationalizing allowances” between the various classes and areas of the civil service. The instrument was approved in 2022, defining a harmonization of rules and criteria for setting the remuneration of public services, holders and members of Public Bodies and the Administration of Justice.

However, its implementation has generated discontent among some segments of professionals. The objections come mainly from doctors and teachers, without excluding the record of salary delays in defense and the interior.

The fact is that the government has taken on the challenge of controlling and reducing spending on pensions. In fact, over the last decade, the civil service wage bill in Mozambique has risen from 10% of GDP in 2017 to 17% in 2022, growth “driven mainly by salaries and not by hiring”.

The IMF, in its third assessment of the history of personnel expenditure since 2016, concluded that workers’ pay has grown three times faster than GDP per capita, while public sector employment growth has lagged behind population growth.

In the meantime, the IMF is encouraging the government to implement additional measures, given the need to bring the impact figure back to the level initially forecast, of around 19 billion meticais.

The agency uses as examples the audit of the payroll of civilian and military state employees and agents, the review of management, representation and location allowances, the retirement process for around 25,278 state employees and agents and the rationalization of new admissions.

In fact, last year the government announced a significant reduction in hiring in health and education, the sectors that demand the most employees in the state apparatus. “These measures are essentially aimed at reducing the overall impact of the policy to approximately that foreseen at the time of its implementation.”

According to the IMF, these measures are set to cost more than 199.375 billion meticais in the 2024 budget, equivalent to 13% of GDP, one percentage point less than the previous year’s budget.