(Bloomberg) -- Mozambique will by the end of the month remove at least 5,000 so-called ghost workers from its payroll, according to the International Monetary Fund, which had warned the southeast African nation over its ballooning public wage bill.
The government aims to reduce the amount it spends on public workers to 10% of gross domestic product by 2028 from 14.8% projected for this year, the Washington-based lender said in a report published July 12.
The commitment to contain wage spending, which absorbs 72% of tax revenues, unlocked $60 million from the IMF last week that risked being delayed until next year.
The decision presented the government with tough choices as it prepares for presidential elections set for Oct. 9.
The nation, which in 2022 became a liquefied natural gas exporter, also plans to trim the wage bill by replacing only one in three workers that leave the public service, except in health, agriculture extension and justice administration, the IMF report said. The government will also accelerate the retirement of public servants that reach 60 years of age.
Mozambique’s massive natural gas discoveries have so far failed to deliver much benefit, with only the smallest of three planned terminals starting production. A $20 billion project by TotalEnergies SE has faced years of delays because of an Islamic State-backed insurgency nearby.
TotalEnergies will probably resume work this year, with the start of production pushed back a year to 2028, the IMF said. An even bigger project that Exxon Mobil Corp. is leading should start exporting gas in 2030, it said.
The IMF also raised concern that perceptions around corruption haven’t improved since 2017.
“Large-scale impunity is perceived as endemic,” according to the fund’s report. “Corruption and patronage networks are generally seen as systemic and often linked to political affiliation.”
Debt Scandal
Mozambique lost access to IMF funding in 2016 after admitting that it had failed to disclose that it had borrowed more than $1 billion. That came to be known as the “tuna-bond” scandal, named for one of three loans that went to purchasing fishing boats that it never used.
US prosecutors said $200 million of the borrowing went to paying bribes and kickbacks. Manuel Chang, Mozambique’s then-finance minister, is on trial in New York to answer for his alleged role. He’s denied wrongdoing.
The IMF said Mozambique needs to revamp its asset declarations and conflicts of interest laws to bring them in line with international standards and best practices. It also needs stronger transparency in public procurement.
That’s particularly important given the size and relevance of Mozambique’s state-owned enterprises relative to the economy, as this generates important corruption risks, the Washington-based lender said.
The total asset size of 21 government companies in 2022 was the equivalent of about 70% of GDP, the IMF said in a separate report. Of those, nine were loss-making in that year.
--With assistance from Borges Nhamire.
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