Mozambique: IMF warns against injecting SOE funds into flag carrier LAM

The International Monetary Fund (IMF) warns of the risks of “resource diversion from critical infrastructure” in light of the capital injection of three “profitable” Mozambican State-Owned Enterprises (SOEs), which are now shareholders in the airline LAM. “Planned investments in LAM by three profitable SOEs pose risks of resource diversion from critical infrastructure. Transactions between the government and SOEs (e.g., transfers, dividends) should flow through the budget.

A transparent strategy to improve LAM’s efficiency and ensure investments are based on rigorous cost-benefit analysis is essential,” reads the IMF report, which includes dozens of recommendations for Mozambique following its regular consultations with the country. A transparent strategy to improve LAM’s efficiency and ensure investments are based on rigorous cost-benefit analysis is essential. SOEs with persistent negative performance should be restructured and state guarantees to SOEs should only be extended with stricter criteria and oversight,”the IMF report reads (page 18).

The Mozambican Minister of Transport said last November that three public companies will inject US$130 million (€110.4 million) to recapitalise LAM, and that 80 employees will leave as part of the restructuring of the state airline. Providing information to members of parliament on the restructuring of Linhas Aéreas de Moçambique (LAM), state-owned, João Matlombe revealed that the Government’s February 2025 decision to transfer 91% of LAM’s share capital to the state-owned companies Hidroeléctrica de Cahora Bassa (HCB), Caminhos de Ferro de Moçambique (CFM) and Empresa Moçambicana de Seguros (Emose) stipulates that these three companies will pay that sum. The IMF, in its recommendations document approved on 13 February, states that “State-Owned Enterprises (SOEs) with persistent negative performance should be restructured, and government guarantees to these enterprises should only be extended under stricter criteria and supervision.” “It is crucial to address the fiscal risks of state-owned enterprises,” the IMF notes, further highlighting that contingent liabilities of SOEs represented 3.5% of Mozambique’s Gross Domestic Product (GDP) in 2024.

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The Fund adds that LAM, the telecommunications operator TMCEL, and Aeroportos de Moçambique “are the SOEs most likely to generate contingent liabilities, due to low liquidity, high indebtedness, and negative profitability.” In parliament last November, Minister João Matlombe acknowledged that the goal is “to recapitalise the company, restructure operations, and acquire new aircraft.” “The new shareholders HCB, CFM, EMOSE, and other public funds reinforce the strategic and national character of the company, maintaining state control and ensuring LAM operates in the public interest,” the minister explained, revealing for the first time the value of the transfer, set at US$130 million. The minister also noted that over the past ten years LAM “has faced persistent economic and financial difficulties,” primarily resulting from “high indebtedness with banks and suppliers,” as well as “very high operating costs, notably leasing, maintenance and fuel,” and “a staffing structure misaligned with actual operational volume.” Moreover, he added, LAM recorded negative operational results of 4.6 billion meticais (€61.9 million) in 2020, reduced to 2.6 billion meticais (€35 million) in 2023.

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