In May 2022, the Mozambican government and with the International Monetary Fund (IMF) signed a Memorandum of Understanding (MoU) aimed at economic and financial reforms in Mozambique, including wages and stuff cuts.
In the MoU, the government promised to pare down the total civil service wage bill by 17 percent by 2026, representing $425 million per year from a peak in 2023. This would be achieved by replacing only one in three civil servants leaving the public sector, except in agriculture, education, health and justice.
In return, the IMF would provide government with a $425 million Extended Credit Facility.
The retirement age was lowered in 2021 from 65 to 60 years for all sectors by the Assembly of the Republic, Mozambique’s parliament, perhaps to mirror the country’s life expectancy which stands at 61.5 years – in July 2022, government did announce that it would raise the retirement age in the civil service to 65 years for both men and women.
Meanwhile, the government has surreptitiously started cutting off staff. This has been happening in the police and in the education and health sectors.
Police General Commander Bernardino Rafael said in late April that he would compulsively retire high-ranking officers who have served more than 35 years and whose average age is over 60.
Cuts have strangely been taking place in the education and health sectors, which were not meant to be targeted as per MoU.
The IMF’s influence in Mozambique had started waning during former President Armando Guebuza’s two terms of office, spanning a decade from 2005 to 2015.
A strong nationalist and a veteran of the war of liberation, Guebuza’s government strong-armed the IMF and donors and strongly resisted the neoliberal policies of the donors and lenders. For example, he started implanting policies geared to develop a so-called domestic capitalist class.
Guebuza’s stance was further helped with the “oil rush”, which promised riches to the country. It was against this background that Guebuza’s government contracted three loans which led to the $2.2 billion ‘hidden debts’ scandal.
The reaction from the IMF and a group of 14 donors was to stop supporting Mozambique, and with Mozambique cash-strapped, President Filipe Nyusi ran into the lap of the IMF for assistance, which led to the signing of the MoU in order to secure an Extended Credit Facility.
Obviously, the IMF’s Extended Credit Facility came in with the toxic conditionalities of yore. Perhaps government banked too much on future natural gas sales and might have negotiated in bad faith expecting that once revenue from gas filled the state coffers’, it would then renege on the deal.
However, this was pushed back by the French oil giant, TotalEnergies, declared force majeure and stopped developing the gas project in the oil rich Afungi peninsula, in the northern Cabo Delgado province.
Consequently, it is now forced to implement policies that are likely to have a negative impact with no consequences to the IMF. These stuff cuts in the public sector are likely to pressure on the pensions, as fewer people will be contributing to sustain the pension fund.
Critically, part of the civil servants to culled off the wage bill are senior managers, meaning that a significant part of the country’s brain trust is likely to be lost. It can only be speculated what that might mean to government’s ability to negotiate deals with multinationals going forward.
Maybe that is the reason why some observers are arguing that that’s IMF’s endgame, that is, to weaken government’s capacity in order to continue to expand the influence of Western countries in Mozambique. After all, the West is ostensibly vying for resources with an eye on China on the horizon.
Regardless, there is no way of sugar-coating this wage and staff cut reform: this is going to be a very unpopular reform politically, whose impact will cut deep into Mozambique’s social fibre. It does not help that 2023 and 2024 will see the country involved in municipal and general elections, respectively.
How will this impact on the ruling Frelimo party’s chance of entrenching itself in power? Soon Mozambicans will give an answer to that question.
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