Mozambique’s state revenue rose 10.3% through September, driven by value-added tax (VAT), while spending fell 7%. The review of the Economic and Social Plan and State Budget (PESOE) nonetheless shows uneven execution: public investment reached little more than a quarter of its annual allocation, and corporate income tax collection declined.

The state collected 291.1 billion meticais in the first nine months of 2026, 27.2 billion more than a year earlier. The increase almost exactly matched the rise in VAT receipts, in a period when tax revenue grew but public investment remained constrained by low external disbursements.

According to the third-quarter PESOE review, revenue reached 71.5% of the annual forecast. Spending totalled 292.2 billion meticais, 7% less than in January–September 2025, equivalent to 55% of the updated budget.

The totals, however, mask significant differences in the composition of the public accounts. On the revenue side, stronger VAT collection contrasted with a fall in corporate income tax. On the spending side, the reduction was concentrated mainly in financial operations, which include debt repayments, while investment executed only 26.2% of its annual allocation.

VAT Explains Almost All of the Net Revenue Increase

Net VAT collection rose 48.9%, from 54.9 billion to 81.7 billion meticais. The figure is net of 16.1 billion meticais in refunds paid to taxpayers.

By Diário Económico‘s calculations based on the report’s figures, the 26.8 billion metical increase in this tax accounts for around 98.6% of the net rise in total revenue, after taking into account the increases and decreases in other lines.

The largest gain came from VAT on domestic transactions, which grew 92.4% to 50.9 billion meticais, exceeding the forecast for the full year. The document attributes this performance essentially to stronger control and collection mechanisms. VAT revenue on imports rose 19.6% to 46.9 billion.

In contrast, Corporate Income Tax (IRPC) fell 3.8% to 74.1 billion meticais. Personal Income Tax (IRPS) grew 4.6% to 51 billion.

Collection between January and September of 2025 and 2026, in billions of meticais. VAT net of refunds. Source: Ministry of Planning and Development.

The trend shows that the improvement in revenue did not extend across the main taxes. Nor does the rise in VAT collection alone allow the conclusion that consumption grew in the same proportion, given the contribution of the enforcement and collection mechanisms cited by the government.

Investment Constrained by External Disbursements

Public investment reached 29.2 billion meticais, according to the report’s execution tables, below the 33.7 billion recorded a year earlier. By September, little more than a quarter of the 111.4 billion meticais set aside for this component in the updated budget had been used.

Performance varied by source of funding. Domestically financed investment reached 15.2 billion meticais, with execution at 44.8% of the annual allocation. The external component stood at 14 billion, equivalent to 18.1% of the budget.

Within the external component, execution financed by grants reached 13.7 billion meticais, while that backed by external loans was limited to 323.9 million, just 1.1% of the planned allocation.

The report links the fall in external investment to low disbursements by partners for project execution. The data thus place the availability of external financing among the main constraints on public investment in the period.

Execution through September 2026, as a percentage of the updated annual allocation. Total investment combines the domestic and external components. Source: Ministry of Planning and Development.

Financial Operations Account for the Largest Share of the Spending Decline

Financial operations made the largest contribution to the 22.1 billion metical reduction in total spending. According to the budget balance table, they fell from 33.9 billion to 21.6 billion meticais.

Operating expenditure declined from 246.7 billion to 241.4 billion, while investment fell by around 4.5 billion.

This composition matters when interpreting the overall 7% decline: a significant part reflects the evolution of financial operations and therefore does not represent an equivalent reduction in the running costs of public services.

Personnel costs reached 163.4 billion meticais, absorbing around 56% of total spending, by DE‘s calculations. Execution on this line reached 76.3% of the annual allocation, in contrast with the 26.2% for investment.

Domestic Debt Gains Weight in the Public Accounts

Despite lower executed spending, central government debt stock rose from 1.091 trillion meticais at the end of 2025 to 1.138 trillion in September 2026.

Domestic debt rose from 474.5 billion to 573.6 billion meticais, lifting its share from 43.5% to 50.4% of the total. The external component fell from 616.1 billion to 564.3 billion.

The report also records the mobilisation of 26 billion meticais from the Bank of Mozambique under Article 18 of the central bank’s Organic Law.

Execution through September therefore presents two challenges for the final quarter: bringing collection closer to the annual forecast and accelerating investments that depend on external financing. Revenue growth provides additional resources, but project delivery remains dependent on disbursements and execution capacity.

Source: Third-Quarter 2026 PESOE Review. Diário Económico calculations.