Wages and debt threaten to absorb 96% of Mozambique’s tax revenue

The notice is contained in the Tax Risk Report 2027, a document in which the government outlines the main risks to public accounts between 2027 and 2029 and identifies public debt as the country's biggest threat to fiscal sustainability.

According to the report, the salary mass should represent 65.3% of the tax revenue in 2027, meaning that “about 65 out of 100 metrics of tax revenue are absorbed by wage expenditure”. It adds that, adding the debt service, estimated at 30.7% of the tax revenue, “approximately 96 metrics” of every 100 collected will be previously compromised.

“ For every 100 methics collected in tax revenue, approximately 96 methics are pre-compromised, leaving about 4 methics available to finance other expenses such as goods and services, transfers, internal public investment and emergency response,” the report said.

For the Ministry of Finance, this shows increasing budgetary rigidity, limiting the ability to accommodate adverse economic or fiscal shocks.

The document also notes that the economy continues to grow below its potential, since after a contraction of 0.2% in 2025, economic growth is expected to reach only 0.6% in 2026 and 1.54% in 2027 in the reference scenario. However, in a moderate risk scenario (2027) it may fall to 0.29% and, in an extreme scenario, reach -0.52%, leading the economy back to recession.

According to official projections, the deterioration of economic activity may result in a loss of tax revenue equivalent to about 8.119 million methicals (117.7 million euros), reducing the expected revenue from 18.7% to 18.3% of Gross Domestic Product (GDP).

The report identifies as major risk factors the volatility of international oil prices, geopolitical tensions, inflation, pressure on the exchange market, the paralysis of Mozal's aluminium foundry, possible delays in natural gas projects and the persistence of insecurity in Cabo Delgado.

The government also warns of the growing dependence on economic growth on gas projects. According to the document, the economy is expected to grow by 9.5% in 2029 with the contribution of those projects, but only 3.7% without gas, a difference of 5.8 percentage points.

“The differential reaches 5.8 percentage points in 2029, showing the relevance of this sector for the projected trajectory,” the report said.

In the exchange rate component, the Ministry of Finance considers that a 20% depreciation of the metical could raise the external debt by about eight percentage points of GDP and increase its service by approximately 12.521 million meticals (181.5 million euros).

The document projects an exchange rate of 65.9 metrics per dollar in the base scenario for 2027, but admits a depreciation of up to 76.97 metrics per dollar in an extreme scenario.

The Tax Risk Report 2027 warns that Mozambican public finances face a context of “high economic and fiscal uncertainty”, marked by the volatility of international oil prices, geopolitical tensions, pressure on the exchange market, high public debt, exposure to natural disasters and financial weaknesses of the state’s business sector.

It adds that these factors can compromise budget execution, revenue collection and fiscal sustainability, while considering that the sustainability of public finances will depend on the ability to anticipate and mitigate these risks. The evolution of public debt, fuel price shocks, exchange risk, slowdown in economic growth, natural disasters and liabilities associated with public enterprises are the main threats.