Mozambique: Pensions Put State Budget Under Pressure

Maputo — The Mozambican Ministry of Economy and Finance wants to “restructure” the country’s pension system, because pensions are now putting the state budget under pressure, reports Monday’s issue of the Maputo daily “Noticias”.

The Ministry is worried that there is a growing imbalance between contributions made to the pension system and the amounts paid out to pensioners. The Public Employee Social Security System (SPSFP) could represent a “fiscal risk” if the amounts paid to the beneficiaries exceed the contributions.

Since 2016, the number of civilian pensioners has risen by 8.3 per cent, and that of military pensioners by 8.5 per cent. In 2019 the SPSFP recorded a total of 203,161 people entitled to old age pensions. The majority of these (69.79 per cent) were military while 30.21 per cent were civilian.

64 per cent of pension expenditure goes to former soldiers and depends on the State Budget. The other 36 per cent is for former civilian state employees, and depends on the contributions they made to the system when they were working.

Since the gap between contributions and payouts is widening, the state will have to finance the deficit. The projections for the period from 2020 to 2023 show that pension contributions by state employees will grow by an average of 3.7 per cent a year, while the payment of pensions will grow by 11.2 per cent a year.

Even worse is the situation with former soldiers, who never paid contributions to a pension fund. The money required to pay military pensions will rise, between 2020 and 2023, by an average of 8.9 per cent more than initially forecast.

The deficit for civilian pensioners will be 1.8 billon meticais, and for military pensioners, it will be a shocking 24.3 billion meticais. That is a total of 26.1 billon meticais (about 362 million US dollars at current exchange rates), which the state must somehow find the resources to cover.

Source: Agencia de Informacao de Mocambique