The Mozambican government has announced a comprehensive plan to settle its accumulated debt to suppliers, estimated at 81.3 billion meticais (approximately $1.27 billion), and introduced strict measures to prevent new unpaid commitments.
Minister of Economy and Finance Carla Louveira announced the strategy in the central city of Beira, Sofala province, at the close of the ministry’s Coordinating Council meeting on 6 October.
BREAKDOWN OF THE DEBT
According to the government’s assessment, the financial situation is complex. The 81.3 billion meticais figure comprises:
- 38.9 billion meticais (approximately $608 million) recorded as unpaid expenditure owed to suppliers
- 33 billion meticais (approximately $516 million) classified as potential liabilities still subject to validation
- 9.3 billion meticais in residual debt validated by the Inspectorate-General of Finance (IGF) for the period 2007-2017
The debt has accumulated over nearly two decades, with more than 45,000 suppliers potentially affected, ranging from small local businesses to large strategic state suppliers.
THREE-PILLAR STRATEGY
The strategy approved by the Council of Ministers is based on three main measures :
Validation within 90 days – All old debt will undergo rigorous validation, including cross-checking information to avoid duplication and ensure only legitimate claims are recognised.
Direct annual payments to small suppliers – The government will make direct payments of 6 billion meticais (approximately $94 million) per year to small suppliers, with priority given to the health and defence sectors .
Prevention of new arrears – An explanatory note and procedural manual will be published, establishing clear criteria, a risk map, control mechanisms, and measures to hold those responsible for generating new liabilities accountable.
The strategy also provides for adjustments to the decree governing the delegation of powers, preventing commitments without budgetary cover and ensuring no government unit contracts expenditure outside its budget and plan .
FISCAL PRESSURE: 86% OF REVENUE CONSUMED
Minister Louveira painted a stark picture of Mozambique’s fiscal constraints, revealing that wages and debt servicing currently consume 86 percent of the revenue collected by the country each month.
“This leaves limited resources for public investment,” Louveira said. “That’s why we call for strict management of personnel expenditure and continued audits of the payroll system to identify and prevent so-called ghost salaries” .
According to the Ministry of Finance, the wage bill grew approximately 83% between 2020 and 2024, rising from 118 billion meticais to 217 billion meticais. Internal debt more than doubled during the same period, from 196.9 billion meticais to 407 billion meticais .
DIGITALISATION OF PROCUREMENT
As part of the reform package, the government has announced that all state procurement will be fully digitised. Paper-based tenders will be phased out, with all procurement processes migrated to the Centralised State Procurement system.
The Procurement Agency has been directed to complete the physical and institutional conditions required for its operations by December 2026, including the construction of its headquarters, approval of its organic statute and internal regulations, and establishment of its staffing structure. This will pave the way for the first centralised procurements in early 2027.
BUSINESS SECTOR RESPONSE
The Confederation of Business Associations of Mozambique (CTA) has welcomed the strategy but called for mechanisms to recognise the financial costs borne by suppliers over the years.
“The Strategy for Payment of State Debt to Suppliers should include mechanisms that recognize the financial costs borne by suppliers over the years, as well as guarantee transparent debt validation processes and greater predictability in the execution of payments,” the CTA said in a statement.
The CTA has proposed the creation of a permanent budget line in the State Budget for the settlement of arrears, alongside stronger compliance with budget commitment rules and the adoption of mechanisms to prevent the accumulation of new debts .
The business association has also suggested a gradual settlement of liabilities accumulated between 2007 and 2025, in a process that could run from 2027 to 2031, combining direct payments and debt securitisation through Treasury Bonds .
ECONOMISTS WARN OF MULTIPLIER EFFECT
Economists have warned that the government’s arrears to suppliers are effectively “financing” the state at the expense of the private sector, with negative consequences for economic activity.
“The company that doesn’t get paid delays payment to its suppliers, reduces orders, postpones investments, and may delay salaries,” said economist Nhanombe. “The effects then reach those companies’ suppliers and financial institutions. This process ultimately reduces consumption, private investment, tax collection, and employment, compromising economic growth” .
Economist Marrengula added: “The cost of the debt doesn’t appear only in public accounts; it appears in the factories that weren’t built, the companies that closed, and the exports that didn’t happen” .