The Republic of MOZAMBIQUE: Economic Perspectives

Mozambique is one of the most vulnerable countries in the world to natural disasters and climate change :  

  • 700 dead and 650,000 victims in February 2000 Floods and Cyclone Eline 
  • Floods in the Zambezi Valley lead 76,000 to be displaced in January 2008. 
  • Cyclone Idai destroys the country with 447 dead and 800,000 victims on March 2019

The country has long experienced a cold war atmosphere between the “FreLiMo” (the ruling party, resolutely a communist organisation) and the “ReNaMo” (a former armed guerrilla of Mozambique transformed into political party since the end of the civil war in 1992).

After the “hidden debt” case, leading to the arrest of Ndabi Guebuza, the former president’s son in February 2019, Mozambique has reached an inflection point with :

  • The gradual return of confidence from international financial institutions 
  • A manageable indebtedness even if public debt is supposed to increase for several years 
  • Average growth rates above 7% of GDP over the period 2000 – 2016
  • The rapid growth of the mining sector and the increase in coal and hydrocarbon reserves.

In 2020, the Covid-19 pandemic caused significant disruption and mostly affected the service, transport, agriculture, manufacturing and telecommunications sectors.

  • The Primary Sector only contributes to 26% of GDP but employs up to 70% of the working population. Most agricultural production comes from family farms, but the sector is very vulnerable to natural disasters such as droughts and floods. The country’s main crops are maize, cassava, beans, rice and a variety of vegetables and oilseeds.
  • The Secondary Sector contributes to22.9% of GDP and only employs 9% of the working population. Mozambique’s natural resources include gas and coal (recently discovered), iron ore, gold, bauxite, marble… The Mozal aluminum smelter dominates a sector which is still struggling to develop.
  • The Tertiary Sector contributes to 39.9% of GDP and employs nearly 20% of the working population. Tourism remain the main activity along with the expansion of financial services thanks to the growing number of retail micro-enterprises.

With a population of 30 million inhabitants, the 14th most populous country in Africa, Mozambique is also the continent’s 14th richest country with a GDP of USD 14.04 Billion. The unemployment rate which it was at 20.7% in 2015 slowed to 3.4% in 2020 (World Bank). Like in most African countries, Social inequalities are widening in Mozambique : a large part of the population live in poverty, in particular people living in rural areas.

Population (2020 UN)32.51 million inhabitants
GDP / Capita USD (2021, IMF)USD 10.0
HDI (2020, UNDP)79th over 190
Doing Business (2020 World Bank rank) 75th over 190
Corruption Perceptions Index 202136h over 180
Unemployment rate (FMI 2021)9.7%

On a Demographic point on view, Mozambique is mainly African (over 99%) with a small community of Europeans, mixed Euro-Africans and Indians. 42% of the population is Christian and 18% Muslim. Population density is one of the lowest in Africa with only 38 inhabitants per km², with a life expectancy at birth of 55.5 years (SSA average is 60.9 years).

On a Political point on view, Mozambique’s political and social situation remains fragile : municipal elections of October 2018 ended with accusations of fraud. The uprising of an armed wing of ReNaMo, following the signing of a new peace agreement on August 2019 between the two parties (after three years of precarious truce), could revive violence. Calls for the resignation of President Nyusi launched one month after the 2019 elections and terrorist attacks by Islamist movements are additional source of instability. Since 2017, several hundred attacks have been killing more than 2,5000 people and more than 550,000 have been internally displaced and carried out in the north of the country by the Mozambican group named “Al Shabaab” 

On an Economical point of view, according to the IMF, GDP growth which has contracted by -0.5% in 2020, is expected to pick up to 2.5% in 2021 and 5.3% in 2022, supported by coal, aluminum and oil exports. Along with devastating cyclones and the deterioration of security conditions in the north of the territory (linked to the development of terrorist attacks), Mozambique remain over-indebted even if progress have been made in debt restructuring. The fall in tax revenues and the increase in expenditure led public deficit to fall from -1.5% of GDP in 2019 to -7.1% of GDP in 2020 (Coface). Public debt increased from 105.4% of GDP in 2019 to 128.5% of GDP in 2020 and is expected to rise to 133.6.% before falling to 127.6% of GDP respectively in 2021 and 2022. Inflation rose from 2.8% in 2019 to 3.1% in 2020 and is expected to keep increasing further to reach 6.2% in 2021 and 6.4% in 2022.

The government’s priorities are to keep consolidating and reducing debt. A project to create a sovereign wealth fund fed by hydrocarbon revenues is being developed to help improve the management of the country’s resources.

Economic Indicators201920202021e2022e 2023e
GDP ($ Billion current price)230.87205.46225.86231.69246.72
GDP growth (%)2.2-
Inflation rate (%)
Public debt (% GDP)
Current balance (% GDP)-

Snapshot of the Gas sector in Mozambique

In 2011, after the discovery of a giant gas field offshore in the country by the Italian tanker ENI, Mozambique has decided to invest nearly USD 60 Billion in foreign direct investment over the next five years for the gas sector alone (biggest investment concentration in Africa). Thanks to the “Coral Flng” project, ENI will produce from 2022 liquefied gas in the country that will be directly exported, allowing Mozambique to generate more revenues from the sector before the beginning of the country’s own production gas projects around 2024/25.      

Despite a particular context of over-indebtedness and hidden debt scandal, the prospects for Mozambique’s remain positive thanks to its enormous gas reserves (the world 9th gas reserves) and expected tax revenues. For the coming years, a slow decline in debt is expected until 2023 thanks to gas revenues to reach around 89% of public debt in 2024.

Mozambique Central Bank

Since 2017, the Mozambican Central Bank has loosened its monetary policy. It helped reduce sharply inflation (from 19.9% in 2016 to 3% in 2019), stabilize exchange rate while maintaining foreign exchange reserves at 7 months. An average inflation rate of 5% is expected for the period of 2020/24. The Central bank key rate, the MIMO, stands at 10.25% to help revive the economic activity in the country, it resulted in slight recovery in consumer credit. However, the credit recovery cannot become strong as long as commercial rates remain at a level more than 18%.

The floating rate regime adopted combined by the Central bank in forex market resulted in an outstanding stability of the country’s currency against strong currencies even without reducing foreign exchange reserves (between 60 and 69 MZN for 1 USD)

Exports and Imports

In 2019, Mozambique was the 121st economy in the world in terms of GDP (current USD) (111st in the total exports and 92nd in total imports). The country exported USD 5.66 Billion and imported USD 11.7 Billion, resulting in a negative trade balance of USD -6.04 Billion.

The top exports of Mozambique are Coal Briquettes ($1.37B), Raw Aluminum ($983M), Petroleum Gas ($361M), Raw Tobacco ($292M) and Electricity ($288M). Mozambique exports mostly to South Africa ($918M), India ($733M), China ($652M), Italia ($399M), and United Arab Emirates ($272M).

The top imports are Refined Petroleum ($2.75B), Chromium Ore ($574M), Iron Ore ($407M), Aluminum Oxide ($343M) and Electricity ($316M). It imports mostly from South Africa ($3.65B), India ($2.14B), China ($1.96B), Zimbabwe ($354M) and Australia ($352M).

Summing all the above, we can notice that the large amount of soil resources available in the country along with the favourable climate for agriculture, make Mozambique a true attraction for investors looking for diversified investments. The main risks remain its vulnerability to natural disasters/climate change and insecurity in the north part of the country.  



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