Good afternoon. The World Bank did not pull its punches in its latest report on Mozambique’s economy, published last week (see below). The problems it identified will not be new to Zitamar News readers, but it is unusual to hear such a wide variety of criticisms - which verge on political statements at times - coming from such a conservative institution as a development bank.
The World Bank repeated many of the points which the International Monetary Fund has been making repeatedly (IMF). Public sector wages and debt interest payments take up too much of tax revenue (87% last year). This limits the ability of the government to spend money on pressing social needs like improving education and healthcare. Public sector debt is getting bigger and more unsustainable. The tax base needs to be broadened to raise additional revenue. All familiar from the IMF.
The full Daily Briefing continues below for Pro subscribers. Subscribers to the Zitamar News tier can read the top half, including the full leader article, here.
But it went further. It illustrated, with a remarkable graph, how public sector earnings are wildly out of proportion with gross national income, compared to the rest of the world. The public sector is not exceptionally large, the report finds; but it is exceptionally highly paid for such a poor country. Measures to control the wage bill since the disastrous salary reform of 2022 have not been effective enough, it found.
There is hardly an aspect of the economy that the World Bank is not concerned about. Ballooning public sector debt has been crowding out lending to the private sector, as commercial banks have bought more and more government bonds. The foreign currency shortage means there is an estimated backlog of $800m of payments waiting to leave the country. Government controls on rice and wheat imports are “expected to cause several economic distortions”. Agricultural productivity is too low, and contributes to severe economic inequality across the regions. The currently projected economic recovery will be too weak to reduce the number of people living in poverty, as it will not keep up with population growth. “Poverty is projected to remain stubbornly high, with limited progress in job creation or improved service delivery. Every year, 500,000 Mozambicans enter the labor market, but only 30,000 formal jobs are created”, the report says.
