Pemba Municipality: Implements Debt Verification for 800M Meticais Debt

• Pemba Municipality is burdened by an inherited debt exceeding 800 million meticais, equivalent to US$12.5 million.
• The municipality has increased annual revenue collection to over 150 million meticais through digitization and tax base expansion, partly by offsetting mutual obligations.
• Pemba will publish a list of debts lacking complete administrative files, requiring creditors to submit supporting documents within 30 days to avoid potential write-offs.
• For recognized debts, the municipality allocates 3-4 million meticais monthly for repayments and has maintained timely salary payments since 2024.
• The municipality has engaged external firms Ernst & Young and KPMG to evaluate its financial model and is open to audits by public oversight bodies.

Alleged creditors will have a legally mandated 30-day period, following publication, to furnish comprehensive documentation substantiating their claims, failing which these files may be presented to the Municipal Council for potential write-off.

Pemba Municipality, located in Mozambique's northern province of Cabo Delgado, is grappling with a substantial inherited debt that surpasses 800 million meticais, an amount equivalent to approximately 12.5 million US dollars at current exchange rates. This considerable financial obligation significantly constrains the municipality's operational capacity and management, despite concerted efforts to enhance revenue collection.

Mayor Satar Abdulgani, addressing AIM during the 6th Ordinary Session of the National Coordination Council, disclosed that this inherited debt positions Pemba as one of the most heavily indebted municipalities across Mozambique. The current administration has been compelled to implement various financial reforms aimed at bolstering its revenue-generating capabilities to address this persistent challenge.

In response to its financial predicament, Pemba Municipality has successfully implemented strategies that have led to a notable increase in its revenue streams. Annual revenue collection now exceeds 150 million meticais, representing a growth of more than 200 percent compared to previous administrative terms. This improvement is largely attributed to the digitization of municipal processes and a strategic expansion of the tax base.

It is important to note that not all reported revenue constitutes direct cash inflows. A portion of this total is derived from mechanisms designed to offset mutual obligations between the municipality and third parties. For instance, if an entity owes the municipality 10 million meticais while the municipality owes that same entity 7 million meticais, these obligations can be balanced. This allows the municipality to record 10 million in revenue and simultaneously reduce its own debt by 7 million, leaving a net balance of 3 million. This innovative approach has enabled the municipality's current revenue-generating capacity to cover essential expenses, ensuring that since the beginning of the current term in 2024, there have been no delays in salary payments to municipal employees.

A critical step in resolving the municipality's debt crisis involves a forthcoming verification process. Pemba Municipality is preparing to publish a comprehensive list of outstanding debts for which complete administrative files are currently lacking. This initiative aims to bring clarity and accountability to the municipality's financial obligations.

Alleged creditors will have a legally mandated 30-day period, following publication, to furnish comprehensive documentation substantiating their claims, failing which these files may be presented to the Municipal Council for potential write-off. For debts that are already duly recognized and verified, the municipality has established a gradual repayment plan, allocating a monthly sum of over three to four million meticais towards third-party payments, including individual agreements with various creditors ranging from 300,000 to 600,000 meticais per month.

Demonstrating a commitment to robust financial governance, Mayor Abdulgani also revealed that Pemba Municipality has proactively engaged external entities, specifically prominent firms Ernst & Young and KPMG, to conduct an evaluation of its financial model. This move underscores the municipality's dedication to modernizing its financial operations and ensuring best practices.

Furthermore, the municipality has expressed its openness to audits by competent public institutions, including various financial oversight bodies and the Administrative Tribunal, which is responsible for scrutinizing the legality of public expenditure. This mechanism is considered vital for strengthening transparency and enhancing the overall management of municipal finances.

Lawyers representing entities with outstanding claims against Pemba Municipality should immediately prepare and submit supporting documentation within the 30-day window once the list of debts lacking complete administrative files is published, to avoid potential write-off of their clients' claims.

Source: Original reporting via AIM