The Mozambican government is projecting a 26.6% reduction in the budget deficit in 2027, cutting it from 113.7 billion to 83.4 billion meticais. The proposed Economic and Social Plan and State Budget (PESOE) combines higher domestic revenues with expenditure restraint and reduced borrowing, but also foresees a 21.1% contraction in public investment.

The deficit is projected to represent 4.6% of gross domestic product (GDP), down from the 7% recorded under the 2026 PESOE law — an improvement of 2.4 percentage points. The document sets out as priorities the strengthening of revenue collection, expenditure control, and a reduction in the state’s financing requirements.

The proposal envisages total resources of 511.2 billion meticais, of which 427.8 billion are expected to come from state revenues, up from the 407 billion projected for 2026. Despite the nominal increase, the share of revenues in the economy is set to decline from 24.9% to 23.5% of GDP.

Tax revenues are projected to rise from 352.7 billion to 372 billion meticais. Current revenues — which include taxes and other regular collections — are expected to increase from 389 billion to 409.9 billion meticais.

On the expenditure side, total spending, including financial operations, is projected to fall from 520.6 billion to 511.2 billion meticais, a nominal reduction of approximately 1.8%. Operating expenditure will remain broadly stable, edging up from 363.1 billion to 364 billion meticais.

The contraction will be most pronounced in public investment, whose allocation is set to decline from 100.8 billion to 79.6 billion meticais. The 21.1% reduction stems from a fall in the externally financed component, which drops from 77.5 billion to 48.5 billion meticais. The domestically financed component, however, is projected to increase from 23.4 billion to 31.1 billion meticais.

To finance the budget, the government intends to draw on 34.8 billion meticais in domestic credit, compared with 36 billion in 2026, reducing its weight from 2.2% to 1.9% of GDP. In 2025, this form of financing reached 62.6 billion meticais, equivalent to 4.1% of GDP.

The government projects a reduction in the budget deficit from US$2.14 billion to US$1.31 billion in 2027.

On the external resources side, the proposal points to a decrease from 77.7 billion to 48.6 billion meticais. Credit lines are expected to fall from 25 billion to approximately 1.069 billion meticais, while grants will decline from 52.6 billion to 47.6 billion meticais.

Domestic resources — comprising state revenues and domestic credit — are projected to increase from 443 billion to 462.5 billion meticais, accounting for 90.5% of budget financing, up from 85.1% in 2026.

The document also projects an increase in the primary surplus — the fiscal balance excluding public debt interest payments — from 61.7 billion to 73.1 billion meticais, equivalent to 4% of GDP in 2027.

The projections are underpinned by an economic growth forecast of 1.6% in 2027, above the 0.6% estimated for 2026. Nominal GDP is expected to rise from 1.634 trillion to 1.816 trillion meticais, while average annual inflation is projected to decelerate from 8.7% to 7%.