Republic of Mozambique: Technical Assistance Report on Government Finance Statistics Mission (December 2-13, 2019)
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International Monetary Fund. Statistics Dept.
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Publication Date:
28 Feb 2020
eISBN:
9798400231261
ISBN:
9798400231261
Language:
English
Keywords:
T-bill debt; BM processes correspond; BM debt; BM present; BM report; Government finance statistics
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This technical assistance (TA) mission on Government Finance Statistics (GFS) was conducted during December 2-13, 2019.. The main purpose of the mission was to review the progress made by the authorities in implementing previous TA recommendations and provide further support to strengthen the compilation and dissemination of GFS in line with international standards set out in the Government Finance Statistics Manual 2014 (GFSM 2014).

Abstract

This technical assistance (TA) mission on Government Finance Statistics (GFS) was conducted during December 2-13, 2019.. The main purpose of the mission was to review the progress made by the authorities in implementing previous TA recommendations and provide further support to strengthen the compilation and dissemination of GFS in line with international standards set out in the Government Finance Statistics Manual 2014 (GFSM 2014).

Summary of Mission Outcomes and Priority Recommendations

1. Technical Assistance (TA) Mission objective for Public Finance Statistics (GFS). A TA mission visited Maputo in the Republic of Mozambique from December 2–3, 2019, to assist the Ministry of Economy and Finance, Mozambique (MEF) to improve the process of compiling and disseminating GFS based on internationally accepted best practices that are appropriate for managing domestic fiscal policy and for ensuring the necessary support of the International Monetary Fund (IMF). This was the final mission in a series of missions funded by the United Kingdom Department for International Development (DFID) under the GFS Module of the Enhanced Data Dissemination Initiative 2 (EDDI 2).

2. TA outcome in the DFID. In the last of this series of TA missions funded by the DFID, the Mozambican authorities, which in the last few years released only the revenue of the Central Government Budget (GCO), began to compile and disseminate the following GCO annual data: (i) detailed public revenue and expenditures; (ii) assets and liabilities transactions; (iii) expenditures according to the Classification of the Functions of Government (COFOG); (iv) the integrated net financial worth balance sheet; and (v) positions of stock and flows of financial assets and liabilities by counterpart.

3. Challenges in the process of compiling the GFS of the government of the Republic of Mozambique (GRM). Despite the significant progress made in compiling the GFS, challenges remain in the compilation process, in particular with regard to data consistency. At the end of FY 2017 and FY 2018, the authorities closed the accounts with discrepancies of roughly 2.5 percent of Gross Domestic Product (GDP). Therefore, the mission set out to review the GCO accounts, thus continuing the work of eliminating the discrepancies begun by the last mission began.

4. Discrepancy in FY 2016–2018. The mission identified the following key causes of the discrepancies: (i) the various sources of data used to produce the Fiscal Table; (ii) the difference in institutional coverage of the fiscal and monetary accounts (above and below the line in the Financial Statement), and (iii) the lack of periodic reconciliation of the data. The GCO accounts for years 2016–2018, presented in accordance with the Government Finance Statistics Manual 2014 (GFSM 2014), which includes stocks and flows, is presented in Table 1 below, and it highlights the reduction of the discrepancy to levels of less than 1 percent of GDP in the last three years.

Table 1.

Integrated GRM Financial Balance Sheet

Unit: millions of meticais

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5. Key findings for the GFS 2016–2018 data. The mission found that for net government credit (NGC), the Bank of Mozambique (BM) reports a position of central government deposits, and that it includes the GCO, extrabudgetary units, and the National Social Security Institute (INSS), but that it excludes local governments (autonomous local authorities); while the revenue and expenditures in the Fiscal Table are for the GCO only. In terms of domestic debt, the BM does not capture debts other than the credit institutions (CIs), such as debts in arrears to suppliers. The MEF does not recognize the issuance of Treasury bills used for monetary policy management purposes. In addition, there has been no record of public buildings acquired under leasing contracts, with only the record of the debt associated with them. The accounts payable and receivable, reported by the authorities as treasury operations, explain some of the discrepancy in that they represent incoming and outgoing amounts in banks, and they had the required counterpart.

6. Action plan for implementing the GFSM 2014. A greater commitment should be given to achieving the set of actions identified to improve the process of compiling GFS. The main recommendations the mission left with the authorities are shown in Table 2 below. The complete list of recommendations can be found in the action plan presented in the section entitled Detailed Technical Assessment and Recommendations in this report.

Table 2.

Priority Recommendations

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Introduction

7. GFS TA mission. A TA mission for GFS visited Maputo, Republic of Mozambique, from December 2 to 13, 2019, to assess progress made regarding the recommendations the previous mission left in late August and early September 2018. This mission was the last one to be conducted for GFS Module of EDDI 2, a five-year initiative financed by the DFID.

8. Objective of the GFS and the EDDI 2 public debt module. The GFS and public debt module focuses on the improvement of GFS in nine selected African countries, including Mozambique. This project’s objective is to strengthen GFS in this group of countries in order to foster fiscal transparency and curtail fiscal risks. In this context, the Mozambican authorities expressed their interest in developing their methods of compiling fiscal statistics in accordance with internationally accepted best practices.

9. Mission objective. Assist the MEF in improving the compilation and dissemination of fiscal statistics that are suitable for fiscal policy management and surveillance by the IMF African Department (AFR), based on the guidelines of GFSM 2014 and Public Sector Debt Statistics: A Guide for Compilers and Users 2011 (PSDSG 2011). AFR was consulted and stressed the necessity of improving the quality of fiscal data and reducing statistical discrepancy to enhance the production of efficient projections.

10. Mission tasks. The mission’s terms of reference were as follows: (i) continue the work of identifying the causes of the statistical discrepancies in the 2016–2018 GCO accounts; (ii) evaluate progress made in carrying out the recommendations of the previous mission in the context of the action plan that the GFSM 2014 aims to implement; and (iii) compile quarterly GFS for the last three years (2016–2018). However, this last point was pending due to a lack of data in Excel format. The authorities were placed in charge of compiling them and submitting them to the IMF by end-January 2020.

11. Mission report structure. Following the executive summary and this introduction, this report presents the key topics addressed and the mission’s recommendations for improving the process of compiling the GFS, and for issues of coordinating the resources that affect the exercise of compiling the GFS in the Republic of Mozambique. The list of officials contacted during the mission is found at the end of the report, followed by complementary information in the annexes.

12. Acknowledgments. The mission thanks the authorities, and in particular Dr. Enilde Sarmento, Dr. Chamila Aly and Dr. Domingos Fumo and their respective teams for facilitating this mission. Moreover, the mission also thanks the local IMF office, and in particular Dr. Esther Palacio, IMF Technical Assistance Advisor and Coordinator in Mozambique, for the unwavering technical support provided to the mission.

Detailed Technical Assessment and Recommendations

13. Progress in compiling GFS according to the GFSM 2014. No progress was made in terms of actions the last mission left, because the workload has increased at the Economic and Financial Studies Directorate (DEEF) and human resources are insufficient. Accordingly, the action plan left by the last mission is still in effect, and the only steps taken have been to review the texts required to ensure a better understanding of the actions and target dates for completing them.

Table 3.

Detailed Recommendations/Action Plan

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Key: High = H Medium = M Low = L

A. Coordination of the GFS Compilation Process

14. GFS Compilation Committee (CCGFS). The GFS compilation process must be organized with various entities. In this regard, the mission reiterates the recommendation made by previous missions: create a committee (the CCGFS), led by the DEEF, to facilitate the process of compiling GFS. In this committee’s structure, for the entities that will be part of it (DEEF, DNCP, DNPO, DNT, GGR and BM), their respective responsibilities and the data to be shared, the mission recommends listing them in a memorandum of understanding signed by the members.

15. Macroeconomic statistics group in the Superior Statistics Council (CSE). Once the GFS comprise a subsystem in the national accounts system, another alternative would be to create in the CSE a structure that already exists in Mozambique: a group for macroeconomic statistics with the same structure and objectives suggested for the CCGFS. Here it should be noted that today the DEEF is already sharing details of GFS with the INE to provide input for the national accounts, and hence this would be a forum for discussions of the four macroeconomic sectors to ensure the consistency of Mozambican data.

16. Mozambique GFS Manual. The mission repeats the recommendation to develop a GFS compilation manual (a guide) that represents a living set of working instructions used in the process of compiling the GFS, which will be useful for the team’s understanding in order to ensure sustainability (create an institutional memory) and consistency in the compilation process.

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B. Sectorization and Sources of Fiscal Data

17. This is ongoing pending the validation of the public sector structure, as well as the inventory and classification of the units in the sector. Consequently, data were not collected from the extrabudgetary units, the local authorities, or social security. This is the starting point in the process of compiling any type of statistic. The mission recommends performing this work in cooperation with all public institutions responsible for compiling macroeconomic statistics in Mozambique to ensure their consistency. The preliminary survey that was conducted in the Mozambique public sector is in Annex I. A structure proposal and preliminary listings of the entities and their respective classifications are found in the annex to the report of the August-September 2018 GFS mission.

18. Obtaining data through the Public Finance Management Information System (SGIFP). As the entity in charge of the process of compiling the GFS, the DEEF already has access to e-SISTAFE to extract primary data on the budget, although there are challenges in extracting from the report trial balances that incorporate the balances of all the accounts that are part of the revenue and expenditure budgetary classifications, which correspond to the position reported in the Government Financial Report and Statement (CGE). The CEDSIF developed the SGIFP, a Business Intelligence (BI) platform that creates system reports automatically. In the current development of the above-mentioned platform, the mission recommends creating standardized tables based on revenue and expenditure to facilitate the compilation of the GFS in a first phase and in the future, perhaps to standardize the GFS codes and generate the GFS automatically in SGIFP.

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C. Identification of Statistical Discrepancies

19. Revision of the 2016–2018 fiscal accounts. Given the necessity of improving the quality of fiscal data, the mission revised the GCO 2016–2018 data to identify causes of statistical discrepancies and recommend processes for producing fiscal statistics in accordance with more up-to-date international standards. The information below shows the key findings and the results the mission identified.

20. Key causes of discrepancies. (i) The various sources of data used to produce the fiscal table; (ii) the difference in institutional coverage of the fiscal and monetary accounts – above and below the line of the Fiscal Table respectively; and (iii) the lack of periodic reconciliation of the data. These are the key causes of the discrepancies. The discrepancies are primarily in transactions for government assets and liabilities. The listing of the transactions that are used to identify the discrepancies is in Table 4 below, and the detail of each transaction is reported in the rest of this section.

Table 4.

Discrepancies 2016–2018

Unit: millions of meticais

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Source: MEF and BM

21. Discrepancies before and after adjusting the Fiscal Table. Figure 1 below demonstrates the magnitudes in the variations of discrepancies identified in accordance with international standards, before and after adjustments are made in the Fiscal Table with the transactions listed in Table 4. As Table 1 shows, Figure 1 reports adjustments in the accounts of about 8.6 billion meticais in 2016, 15.3 billion in 2017 and 21.9 billion in 2018, representing reductions in discrepancies to levels below 1 percent of GDP in the last three years. Moreover, the adjustments that were made in the GFS in accordance with the GFSM 2014 identified a greater overall total compared to the GFS that were compiled according to the GFSM 1986, due to the reclassification of investment revenue and expenditures as part of financial or nonfinancial assets.

Figure 1.
Figure 1.

Overall Balance vs. Discrepancies

Citation: IMF Staff Country Reports 2023, 045; 10.5089/9798400231261.002.A001

22. Integrity of the GFS. The identification of the discrepancies certifies only that the fiscal data used are duly classified according to the GFSM 2014. It is the responsibility of the authorities to ensure the integrity of the accounts so that the Fiscal Table captures all GCO transactions that are to be incorporated into the above-mentioned table in accordance with the double-entry accounting rule. The mission believes that there must be periodic and fundamental reconciliation to ensure that the Fiscal Table is capturing most if not all GCO transactions.

i. Investment in Nonfinancial Assets

1.1 Investment expenditure financed with external funds

23. Government investment projects financed with external funds. The mission believes that some of the inexplicable discrepancy may be in investments in nonfinancial assets. Currently the authorities assume for investment expenditure that 100 percent of disbursements must be external financing (common funds and other funds via/outside the Single Treasury Account (STA)) and 100 percent of grants. Therefore, determining the amount of disbursements actually used has been a challenge due to the lack of timely information on investment projects. This generates potential discrepancies that not all disbursements have been used and remain available in banks. Hence, we have an increase in expenditure with no counterpart in banks.

24. Analysis of this item’s consistency in the 2014–2018 Fiscal Table. The mission observed that the above-mentioned requirement is applied only in the Fiscal Tables for the years 2017 and 2018 (see Table 5), prepared by the authorities. Even though the mission agrees with the methodology, it is important to ensure that the methodology that is used is consistent, and first and foremost, that efforts are made to obtain actual investment expenditures.

Table 5.

Investments in Nonfinancial Assets

Unit: millions of meticais

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Source: CGE and 2014–2018 Fiscal Tables
1.2 Leasing of government buildings

25. Leasing of government buildings. In 2018 the authorities assumed the amount of 11.3 billion meticais (see Table 6 below) with reference to bank financing for leasing public buildings, the value of which was reconciled with financial institutions and the amount of the BM debt was updated. According to the authorities, disbursement associated with this debt has been recorded in the domestic debt stock, but there has been no recognition of government buildings in government financial worth. This is a source of discrepancy in the Fiscal Table.

Table 6.

Leasing of Government Buildings

Unit: millions of meticais

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Source: DNT (Detailed statements of the domestic debt)

26. Treatment of leasing of government buildings. The entry of leasing of government buildings requires two records. Since the mission did not have access to the lease contracts and did not know the contract terms (including payment of interest and commissions), for the sake of simplicity, but assuming that the ownership of the buildings at the end of the contract is the government, according to the GFSM 2014, using the cash approach, the authorities should prepare the following records: public debt contracted via leasing contracts and recognition of government buildings in government property. As Table 7 below illustrates: (i) the government contracts loans under leasing contracts, which assumes an increase in the domestic debt – loans, against an increase in deposits; (ii) the second record is for the property, which represents the payment to the contractor, and thus this requires an increase in the acquisition of nonfinancial assets (31) against a reduction in deposits (32).

Table 7.

Treatment of Leasing

Unit: millions of meticais

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27. Suitable record of buildings in government property. In paying contractors, if there is only a reduction in deposits without a counterpart, as the second record above suggests, this record may create an imbalance in the accounts. Even though the GCO has no equity accounting, the record of transactions at the financial and budget level should be duly captured and recorded in the accounting. However, the authorities now have an inventory of government property that can be used to ascertain the value of the stock and the change in nonfinancial assets for the GFS. Therefore, the record of government buildings in leasing contracts would require the record of buildings in the inventory of government property.

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ii. Central Budgetary Government Deposits

28. GCO deposits in the Fiscal Table. The position of deposits in the last four years, reported by the BM, is in the following table. The mission attempted to understand: (i) the composition of deposits reported by the BM; and (ii) the institutional coverage of the deposits.

Table 8.

GCO Deposits Excluding the INSS

Unit: millions of meticais

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Source: BM (NGC)

29. Composition of deposits. Deposits are more common financial assets. According to paragraph 7.15 of the GFSM 2014, “financial assets are resources that normally provide the right for the owner of the asset (the creditor) to receive funds or other resources from another unit as a liability.” In this regard, government financial assets are all demand or term deposits, regardless of purpose (earmarking,) or origin of funds (payment of taxes, income, issuance of T-bills used or not used, others). However, in the case of Mozambique:

  • a) Treasury bills: The authorities maintain that deposits from issuances of T-bills for monetary policy should not be part of total deposits since they constitute a debt only after they are used (greater detail on the treatment of this debt instrument is presented later in this report). However, the MEF considers the interest from these deposits. Assuming that the unused securities are not government domestic debt, the deposits from these issues should not be considered a government financial asset, nor should the interest on the T-bills that these deposits generate.

  • b) Earmarked resources: Another adjustment made in deposits to compile the fiscal accounts with which the mission disagrees is the exclusion from earmarked resources except for fiscal year 2017, the only year in the last four when the above-mentioned adjustment was not made.

  • c) Other regularizations: These are government earnings recorded in the monetary accounts generated by the commitment approach the BM uses. Since these regularizations impact the financial asset, they generate a discrepancy in the Fiscal Table because there is no counterpart in the record above the line in income. This issue is also observed for interest, which according to paragraph 5.107 of the GFSM 2014, is a category of income (revenue that the owners of some types of financial assets received, including deposits), because they are not duly recorded. The mission highly recommends adopting this modified cash on hand approach to capture this type of government income, which the MEF is unable to capture on a pure cash basis.

30. Institutional coverage of deposits. The BM presents as available government cash the total of central government deposits (GCO and extrabudgetary units) and the INSS, excluding local government. According to paragraph 2.58 of the GFSM 2014, the central government includes all resident public entities that perform government functions as their principal activity. Thus, public entities that are part of the central government are: (i) entities that are part of GCO, (ii) extrabudgetary units; (iv) regional government; (iv) local government; and (v) social security. To be considered central government deposits as a whole, the BM should begin including available cash of the local authorities as well. In addition, the mission recommends reporting the totals of each government subsector as the international standards recommend.

31. Difference in institutional coverages in the monetary and fiscal accounts. Just as the BM reports deposits, the MEF presents it as part of financing in Fiscal Table, but the Fiscal Table covers the central budgetary government. This difference in coverage of the monetary and fiscal accounts generates a discrepancy since “above the line” revenue and expenditure have less coverage than “below the line” transactions in banks. Therefore, the mission sought to identify the amount of corresponding deposits in the INSS and EBUs. The authorities supply the annual INSS balances, and the listing of the EBU is pending, in order to ascertain the amount in this subsector of the government.

32. Discrepancies generated by the amount of deposits in the fiscal accounts. (i) differences in the institutional coverage of the monetary and fiscal accounts; (ii) differences in the record of monetary and fiscal accounts, which results in not recognizing income generated in the monetary sector; (iii) the nonrecognition of some T-bill liabilities in the BM by the MEF are the factor that creates a discrepancy in deposits. The mission recommends work to conduct a detailed analysis of the content of deposits the BM reports in order to ensure the proper treatment of the financial asset in MEF government accounting.

33. Amount of deposits assumed in the 2016–2018 Fiscal Table. Taking this into account according to the approach of available cash in use, the mission considered the entire amount the BM reported as deposits, excluding incoming amounts from T-bill issues and interest, since these securities are not considered government debt. “Other regularizations” were also excluded which, using a commitment approach, should be considered government income. Moreover, regarding the matter of coverage, the amount of INSS deposits were not considered in order to maintain consistency with the above the line.

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iii. Domestic Debt

34. Domestic debt. During the mission the work began of reconciling the 2018 domestic debt the BM and MEF reported with the support of senior managers from both public institutions. The provisional result of this work is presented in the following table. The authorities are still responsible for continuing the work included in reconciliations of previous years. The mission recommended preparing a reconciliation report to ensure an institutional memory.

3.1 Treasury Bonds

35. Treasury bonds (T-bonds). There is a significant difference in the positions reported by the MEF and BM. The BM presents an aggregated total of Treasury securities that includes (T-bills and T-bonds). The information as reported fails to facilitate the reconciliation with the position the MEF presented. However, the MEF obtains data from the Mozambique Stock Exchange. The BM ascertains its data from the national banking system, and it remains responsible for reporting the T-bond position separately from T-bills. In this context, the mission considered the MEF data as more reliable for the purpose of compiling the Fiscal Table and recommended reconciliation work between the BM and MEF.

Table 9.

Reconciliation of the 2016–2018 domestic debt

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3.2 Treasury bills (T-bills)

36. Amount of T-bills recognized in the fiscal accounts. The domestic debt stock reported by the MEF recognizes only as T-bills the amount of the issue that was actually used by the National Treasury, and this is used for fiscal policy purposes. The amount of T-bills issued for monetary policy purposes is not considered part of the government debt stock at the MEF level. However, it is the BM’s responsibility to produce reports including informaiton on the position of the amount of “T-bills used.” This concept is not recognized for the purpose of disseminating Mozambique’s monetary accounts. The position of government deposits and credits, reported by the BM, includes all the flows that generate the issuance of T-bills during the year. According to the BM: (i) there is no debt service associated with the portion of T-bills not used by the government; (ii) there have been no guidelines from the MEF nor is there any agreement between the MEF and the BM for issuing T-bills used for monetary policy purposes; and (iii) the MEF is unaware at this time that the above-mentioned issues of T-bills are done by the BM. However, the deposits from these issues generate interest for the government. In addition, the position of the NGC in the Fiscal Table prepared by the MEF has taken the total of T-bills issued into account.

37. Characteristics of T-bills in Mozambique. T-bills are government financing and monetary intervention instruments issued by the BM as part of monetary policy measures to finance temporary government Treasury cash shortfalls. They originate with the seasonality of fiscal revenue or potential delayed disbursements from cooperation partners. The legal regime for T-bills is established by Decree No. 22/2004 of July 7, which delegates to the MEF the authority to set by ministerial order the maximum amount of T-bills to be used during the fiscal year. The amounts of T-bills recognized by the MEF as a T-bill debt in the last three years is within the maximum limits set by budget law. Thus, as such the BM presents the T-bill debt, implying that part of the T-bill issue was done without statutory support.

38. Recognition of T-bill debt. The GFSM 2014 defines as debt all liabilities that require payment of interest and/or principal by the debtor to a creditor at future dates. The manual does not differentiate the treatment of securities, whether their maturity is short or long term, used or not used, for fiscal or monetary purposes. In addition, the legislation allows the authorities to issue T-bills for fiscal and monetary purposes, but it is not clear how this debt will be assumed by the government or the rest of the public sector (in this case the BM).

39. T-bills that the MEF does not use do not constitute GCO debt. As the Mozambican authorities currently report the data, the recognition of the amount of T-bills used for monetary policy purposes is unclear. Since there is no debt service from the issue of these T-bills, and given the terms under which they are issued and the definition established in the GFSM 2014, it is believed that this obligation should not be presented as a part of GCO debt; however, there is no doubt that this amount represents public sector debt. Given this fact, the mission recommends reaching a consensus as to how this debt should be recognized in the public sector monetary and fiscal accounts by the MEF and the BM.

3.2 Loans

40. Loans. In the BM loan positions that are reconciled, there are only insignificant differences generated by the exchange rates that are used. For commercial bank loans there are significant differences in the positions of both institutions, especially in 2015. BM recognition of the Portuguese line of credit explains some of the difference. This line is not GCO debt, so that the difference is due to the coverage of the monetary and fiscal accounts. For the rest of the difference in loans, it is suspected that it is also a problem of institutional coverage. The mission used the MEF position to produce the Fiscal Table, and it presents the detail of loans and analyzes consistency between stocks and flows. The BM recommends presenting the detail of commercial bank loans in order to recognize it with the MEF position and present the debt according to each subsector in the public sector.

3.3 Arrears

41. Debts not captured by the NGC. Debts of suppliers in arrears are debts recognized in the domestic debt stock reported by the MEF but not captured by the BM, naturally because they are not national bank debts. In 2017 the Mozambican authorities conducted a survey of the debts of government institutions with various suppliers in the period from 2007 to 2016. The amount of about 29.8 billion meticais was identified, 19.8 billion meticais of which were approved by the Administrative Tribunal (AT), while 9.9 billion meticais were not approved by the AT.

42. Process of regularizing arrears. According to the Strategy for Paying the Government Debt to Suppliers, launched by the authorities in July 2018, the regularization process assumes that there are three points at which the government accounts are adjusted: (i) when the debt is recognized and validated, which thus updates the debt stock; (ii) the associated record of expenditure by processing extrabudgetary expenditure; and (iii) the record of payments (automatic mode in e-SISTAFE). There are provisions of various types of regularizing arrears in the Government Budget (OE), including issuances of government debt securities.

43. Payment of arrears. Notwithstanding the determination up to 2016, the above-mentioned regularization strategy began to be implemented in 2018, when 13.119 billion meticais were validated for payment. As of end-2019, the GRM validated an additional 5.82 billion meticais. Table 10 presents the amounts paid up to the date of the mission.

Table 10.

Debts in “Arrears” Recognized, Validated and Paid

Unit: millions of meticais

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*One million meticais is scheduled to be paid by the end of the year. As of the end of the mission there was no information on the actual payment of the above-mentioned amount. Source: DNT

Treatment of arrears. The government’s relations with its suppliers generates a public expenditure based on a commitment: (i) when the authorities validate the arrears, the expenditure must be recognized according to its type (operating or investment expense),and a debt in “accounts payable” is the counterpart; (ii) at the time of payment, a reduction in deposits is recorded against a reduction in “accounts payable.” For the securitized debt, the mission recommends increasing securities against a decrease in “accounts payable” (see Table 11 below).

Table 11.

Treatment of “Arrears”

Unit: millions of meticais

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44. Recognition of the debt of arrears prior to payment. According to the CEDSIF, there is a functionality in e-SISTAFE that enters expenses to be paid and checks arrears. However, since this is considered an extrabudgetary expense, it does not observe the double-entry rule and the debt record remains pending; thus the payment of this debt generates a discrepancy in the accounts. The following table presents the treatment recommended for the 13.119 billion meticais, a debt that was recognized and validated in 2018, as well as their respective payments. The recording of this debt as an expense in 2018 has an impact on the year’s overall balance, and payments made in 2018 and 2019 should be recorded as transactions at the financial level with an impact on government financial worth.

45. The mission recommends recording arrears on the commitment basis. Notwithstanding the fact that the authorities use cash basis,1 the mission recommends recording arrears as is done using a commitment approach to ensure greater control over this debt. The Fiscal Table that was prepared during the mission considers that the arrears expense that is paid by September is recorded as the strategy requires. The information is confirmed by the authorities and thus the remainder to be paid is recorded as part of the liabilities at end-2018.

3.4 Other regularizations of the domestic debt

46. Other regularizations in credits reported by the BM. The credits reported in the monetary accounts present other regularizations that the MEF is to validate as mentioned in the case of deposits. Therefore, these regularizations require a counterpart in expenditure; otherwise they generate discrepancies.

3.5 Other Economic Flows

47. Other Economic Flows (OEF). These are changes in the volume or value of assets or liabilities that are not generated by transactions (paragraph 3.31 of the GFSM 2014). These OEFs are not transactions because they do not meet one or more features of transactions. For example, when the amount of an asset is expressed in foreign currency, the currency may change as a result of alterations in the exchange rate, or the value of an asset may change with the passage of time. There are two main categories of OEFs, described as “gains and losses” and “other changes in the volume of assets and liabilities.” If the transactions in NGC credits have been ascertained by measuring the difference in the stock from one year to the next, it is important to ensure that the OEFs, i.e. the cancelations of certain debts and adjustments attributable to exchange losses and gains, have been properly adjusted in accordance with the positions for the transactions in the Fiscal Table.

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iv. Other Accounts Payable and Receivable

4.1 Treasury Operations

48. Suspense accounts and regularization of transactions. Revenue items such as taxes, grants, social contributions, sales of goods and services; and on the expenditure side, remunerations, goods and services, interest, transfers, subsidies and other expenses, normally have a counterpart in available cash, and thus the Mozambican authorities have a set of transactions that do not have definitive accounting entries. They are pending due to various factors such as: lack of available cash in banks; lack of a budget in the system; or unknown details of transactions in banks. The above-mentioned set of transactions is named “Treasury Operations,” and the totals in 2015–2018 are presented in the following table.

Table 12.

Treasury Operations

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Source: I-4 Statements of CGEs

49. Definition of Treasury Operations. As provided in subparagraphs f) of article 47 and h) of article 48, both Law No. 9/2002 of February 12, which creates the Government Financial Administration System (SISTAFE), Treasury Operations are “advances and their regularizations.” According to article 2 of the MEF Regulation on Treasury Operations, approved by Ministerial Order No. 124/2008 of December 30, Treasury Operations are incoming and outcoming funds of the Single Treasury Account (STA) that cannot be charged to the Government Budget (OE), and they refer to movements of funds of third parties for which the Treasury is responsible (T-Bills), as well as the transfer of funds for the decentralized execution of the Government Budget and T-bills. Included in Treasury Operations are movements of funds charged to the Government Budget that, when realized, cannot be recorded in the Government Budget immediately using budgetary classifiers.

50. Incoming funds – Treasury Operations. As established in No. 1 of article 3 of the above-mentioned regulation, entries of funds in the STA by this avenue are made in the DNT and the Provincial Economy and Finance Directorates through the BM and/or commercial banks with government cash functions to address the following situations: (i) revenue collected from third parties where the Treasury is responsible for paying expenditures not posted in the Government Budget; (ii) collection of balances ascertained at the end of each fiscal year; (iii) accounting record of counterpart of advances made for Treasury Operations to pay expenses charged to the Government Budget. Therefore, this entry is intended to receive suspense deposits of amounts not chargeable to the Government Budget whose payments are contingent on the revenue arriving beforehand.

51. Outgoing Funds – Treasury Operations. According to No. 1 of article 4 of the same regulation, the purpose is to deal with: (i) expenses not chargeable to the Government Budget, the payment of which is contingent on the revenue arriving beforehand; and (ii) urgent expenses that are exceptional in nature, with substantiated grounds and that can be charged to the Government Budget. According to the authorities, in this item extrabudgetary expenses are recorded that have not been yet recorded as an expense, but that have not been paid either. For these cases, under the cash approach the government currently uses, these extrabudgetary expenses should not be included in the Fiscal Table to avoid creating a discrepancy. Using a commitment approach, the accounting system should have the ability to recognize these transactions in expenses and revenue, even if they do not yet merit their due treatment in the financial balance sheet, so that they are awaiting payment in items of accounts payable and receivable.

52. Discrepancies created by Treasury Operations. Based on the provisions of the law, the recording and control in e-SISTAFE, the mission believes that: (i) Treasury Operations are anticipated to record an expense or revenue in the budgetary balance sheet until the financial balance sheet is prepared to record the transactions and vice versa; (ii) these operations represent accounts payable and/or receivable that the Fiscal Table does not include below the line. Thus, based on the dual-entry accounting rule, accounts such as fiscal years ended or entered in banks for which the transaction details are unknown so that the proper entry above the line cannot be made and there is no counterpart below the line, which generates discrepancies.

53. Record of Treasury Operations. In a cash approach, which the authorities use, all transactions that generate activity in banks, in the case of Mozambique incoming funds (debit balance) in Treasury Operations should be considered below the line in the Fiscal Table as accounts receivable; otherwise they generate discrepancies. In a commitment system or even in a modified cash system, both incoming and outgoing funds in Treasury Operations should be included in the Fiscal Table.

4.2 Fiscal years ended

54. Fiscal years ended. They have been recorded as part of expense, but they represent credits recognized by the GCO, the payment of which is pending. As we reported in the Treasury Operations, the fiscal years ended do not have a below-the-line counterpart either, and thus they generate discrepancies. The mission recommends reclassifying them according to the nature of the expense above the line, and add the total amount as part of accounts payable below the line.

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D. Compilation of Annual 2016–2018 GFS

55. Result of the compilation of annual 2016–2018 GFS. Based on the detailed analysis of the accounts, the exercise of compiling the 2016–2018 GFS was repeated, and the results are summarized in Table 1 above, which presents the 2016–2018 GRM Integrated Financial Balance Sheet. More detailed information for the compilation exercise is illustrated in the other tables that follow and in Annexes III-VII of this report. In this regard, the mission recommends: (i) formal validation by the authorities and submission to the IMF to be included in the GFS database; (ii) submission to the Mozambique National Statistics Institute (INE) which, according to the DEEF, is waiting for the data to compile 2018 GDP; and (iii) replication of the GFS compilation exercise on a quarterly basis.

56. Fiscal data used to compile GFS extracted from the CGE. The data for compiling the GFS are obtained from the CGE, which reports the information in summary form, taken from PDF format documents and converted to Excel manually. This method of compiling GFS carries risks because the compilation exercise is subject to repeating possible errors made in the CGE compilation process. Moreover, a more detailed reclassification of some of the items is not possible. For compiling the GFS, the mission recommends using primary data extracted from the integrated systems trial balances (for Mozambique, from the e-SISTAFE).

Table 13.

Statement of Sources and Uses of Cash /Fiscal Table

Unit: millions of meticais

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57. Government revenue transactions 2016–2018. In general, revenue has been stable over the last three years, at roughly 26 percent of GDP. Therefore, some findings about revenue follow:

  • a) “Other taxes” account for 5 percent of total revenue. This high amount can be explained or reclassified correctly if the details of the revenue are available;

  • b) Although there are social security contributions in revenue, the level of government expenditures on social security benefits is unclear. Therefore, the mission believes that some social contributions were classified incorrectly or the social benefits are classified incorrectly, so that these items must be revisited;

  • c) The high amount of dividends in 2017 needs to be explained to ensure that it is not considered a “super dividend;” if it is, it should be reclassified below the line in “securities and holdings in investment funds;”

  • d) There is no record of interest received, yet the amount of loans granted in financial assets is significant.

58. Transactions in government spending 2016–2018. Like revenue, government spending in the last three years was stable at about 20 percent of GDP. The mission believes that the social contribution and social benefit items need to be revised. Moreover, subsidies as they are reported cannot be classified as paid to the public and private or other sectors of the economy. The item “fiscal years ended” needs to be properly detailed to make correct classification possible. The COFOG the authorities adopted is aligned with international standards, and the data compiled during the mission are presented in Table 14 below. However, there are some inconsistencies in interest reported in expenditures of an economic type compared to those reported in the expenses by functions, as well as investment expenses (nonfinancial assets). For consistency’s sake, the mission used the data reported in expenditures by type.

Table 14.

Government Spending by Functions of Government – COFOG

Unit: millions of meticais

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59. Transactions in nonfinancial assets. Available fiscal data report only acquisitions of buildings and infrastructure, and insignificant amounts in other fixed assets. The mission believes that it is highly unlikely that over the last three years the authorities did not acquire any machinery or equipment, that there were no transactions that affected the stock of inventories, or that Mozambique has no nonproduced assets. The CGE presents the inventory of government property and hence the mission recommends examining the possibility of bringing value to the stock, or at least the changes in this asset to the GFS.

60. Stock and transactions in financial assets and liabilities. As mentioned earlier in this report, the main concerns are government deposits, completing the reconciliation work that is now pending, and a methodology to be determined for the process of compiling the GFS or the Fiscal Table. Capital holdings of businesses and disposals in 2017 need to be reviewed for a better understanding of what took place that year. In general, the liability data is consistent, so that the main concerns are in the amounts of debt securities and external lending.

61. Financial assets and liabilities by counterparty. The stock of assets and liabilities by counterparty is in the table below. More detailed information about the holders of securities and loans would show greater transparency of asset and liability transactions by counterparty. In addition, the data received for these purposes do not separate the assets and liabilities of financial and nonfinancial corporations.

Table 15.

Stock of Financial Assets and Liabilities by Counterparty

Unit: millions of meticais

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E. Fiscal Table Revisions

62. Align the Fiscal Table with the most up-to-date international standards. The Mozambican authorities use the Fiscal Table compiled using the GFSM 1986 as a main fiscal instrument. Annex VII reports the data in the various methodologies (GFSM 1984 vs. GFSM 2014) for a better understanding of the difference in methodologies. The mission reiterated that the Fiscal Table format recommended by the most up-to-date international methodology (GFSM 2014) reports greater revenue, fewer expenditures, and consequently a more favorable overall balance for the authorities. In addition, it differentiates financing transactions related to the other transactions more easily, which thus facilitates policy decisions for debt, as well as decisions for strengthening collection for financing a certain type of expenditures (for example, operating or investment expenditures). This also provides for a rapid comparison of fiscal policies adopted in Mozambique compared to the other countries in the region and the rest of the world.

i. Government revenue

63. Government revenue in the Fiscal Table. The authorities consider disposals of government property and holdings as revenue; according to the GFSM 2014, they are part of “investment in nonfinancial assets” and “acquisition in financial assets” respectively (see paragraphs 8.28 and 9.47–9.49 of the GFSM 2014). Furthermore, the authorities record grants separately from revenue. A grant is a type of government revenue according to the GFSM 2014 that does not constitute a discrepancy in the Fiscal Table, but reclassifying it according to the GFSM 2014 results in revenue greater than that presented in the Fiscal Table produced by the authorities (see Figure 2 below). Hence, the mission reiterates its past recommendation to revise this in the Fiscal Table.

Figure 2.
Figure 2.

Government revenue

Citation: IMF Staff Country Reports 2023, 045; 10.5089/9798400231261.002.A001

ii. Government expenses

64. Government expenses in the Fiscal Table. The mission recommends reclassifying “capital expense” which the authorities currently present as being part of total expenses in the “investment in nonfinancial assets” or “investment expense” item. This reclassification is conducive to identifying a lower expense and considering the increased revenue (as we saw in the previous paragraph) it leads to a current and overall balance that is more favorable for the government. The following figure shows that the expenses for the years 2016–2018, compiled according to the 2014, are slightly below those in the Fiscal Table according to the GFSM 1986 methodology.

Figure 3.
Figure 3.

Government Expenses

Citation: IMF Staff Country Reports 2023, 045; 10.5089/9798400231261.002.A001

iii. Acquisition of nonfinancial assets

65. There is currently no item entitled acquisition of nonfinancial assets in the Fiscal Table of the Mozambican authorities, even though the components are part of it. The mission recommends adding to this item all investment expenditures, the disposal of government property, and capital spending recorded as part of current expenditures.

iv. Financial assets and liabilities

66. Nor are there financial assets as an aggregate currently in the Fiscal Table adopted by the Mozambican authorities. However, some components are above and below the line. Thus, the mission recommends beginning to report this item that should include government deposits currently recorded as part of the NGC. Moreover, add to this aggregate other assets reported above the line such as: onlending agreements, holdings in the capital of government-owned corporations and investee companies, Treasury loans, financial investments of the Institute for the Management of Government Holdings (IGEPE), and other accounts receivable. The mission suggests presenting these items before liabilities and just after the overall balance.

67. For liabilities, the mission recommends presenting net obligations in accordance with the debt instruments. Detail in terms of disbursement and amortization may be useful supplementary information presented as a memorandum item.

68. Add the items of other accounts payable and receivable to the Fiscal Table. The fiscal years ended and Treasury Operations are items that would be classified in this aggregate reported as part of financial assets and/or liabilities.

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Annex I. Officials and Employees Met During the Mission

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Annex II. Institutional Structure of General Government

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Plan for Implementation of the GFSM 2001/2014 Complete the GFS Module of the Project EDDI 2 financed by the DFID of the United Kingdom. However, there are still many challenges in the process of compiling GFS in Mozambique. Another result of TA from the DFID is that the authorities have an action plan that serves as a guide in the process of implementing the GFSM 2014.

Annex III. Detailed Government Revenue – GRM

Unit: millions of meticais

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Annex IV. GRM Detailed Government Spending

Unit: millions of meticais

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Annex V. Transactions in Assets and Liabilities – GRM

Unit: millions of meticais

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Annex VI. Transactions in GRM Financial Assets and Liabilities by Counterparty

Unit: millions of meticais

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Annex VII. GRM Fiscal Table – GFSM 1986 vs. GFSM 2014

(Valores em Milhões de Meticais)

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1

On the cash basis, expenses are recognized only when paid and revenue when it is received, regardless of when this was done or collected or of the existence of a payment or reception commitment respectively. Thus, this regime does not include “accounts payable or receivable.”

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Cover IMF Staff Country Reports
Republic of Mozambique: Technical Assistance Report on Government Finance Statistics Mission (December 2-13, 2019)
Author:
International Monetary Fund. Statistics Dept.
Volume/Issue:
Volume 2023: Issue 045
Publisher:
International Monetary Fund
ISBN:
9798400231261
ISSN:
1934-7685
Pages:
45
DOI:
https://doi.org/10.5089/9798400231261.002
Figure 1.

Overall Balance vs. Discrepancies
Figure 2.

Government revenue
Figure 3.

Government Expenses