Overview

  • Country Overview

    Mozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and Swaziland. Its long Indian Ocean coastline (of 2,500 kilometers) faces east to Madagascar. About 70% of its population of 28 million (2016) live and work in rural areas. It is endowed with ample arable land, water, energy, as well as newly discovered natural gas and mineral resources offshore; three, deep seaports; and a relatively large potential pool of labor. It is also strategically located, with four of the six countries it borders landlocked and hence dependent on it as a conduit to global markets.

    Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance its economic, political, and social development to the stability and growth of Southern Africa as a whole.

    Political Context

    Mozambique’s political landscape bears the scars from the 15-year civil war that followed independence from Portugal in the 1970s, leaving the country and its economy in ruins. The former rebel movements, the Front for the Liberation of Mozambique (Frelimo) and the Mozambican National Resistance (Renamo), today remain the country’s main political forces, followed by the Mozambique Democratic Movement (MDM). While Frelimo won the most recent presidential elections in 2014, and retains a comfortable majority in parliament, the two main opposition parties, Renamo and MDM, have both gained ground.

    Renamo has maintained armed militias and from time to time parts of the center of the country have witnessed active conflict between its residual militia and Mozambique’s armed forces. Peace talks between the two parties have gathered momentum in 2017, however. President Filipe Nyusi met Renamo leader, Afonso Dhlakama, in August. Working groups are developing recommendations on decentralization and military affairs for endorsement by parliament, set for February 2018. Meanwhile, the ruling party’s congress in September 2017 marked an important political milestone in the run up to municipal (2018), presidential, legislative, and provincial (2019) elections.

    Economic Outlook

    The Mozambican economy is showing some signs of recovery after a difficult 2016, which saw a sharp slowdown in growth and shocks to both the country’s currency and to inflation. First quarter GDP growth in 2017 picked up to 2.9%, more than double the growth rate of the preceding quarter. The metical, which had been steadily depreciating in the first ten months of 2016, is now more stable, having strengthened by 28% against the US dollar in the last 9 months. A strong monetary policy was key to this shift, which also helped inflation to slowly begin easing by mid-2017. Strengthening prices for coal, aluminum, and gas, a post-el Niño recovery in agriculture, and progress in the peace talks, could steer growth to 4.6% in 2017, and toward 7% by the end of the decade.

    Inflation remains very high at 18%, with direct implications for Mozambican households, and for monetary policy seeking to ensure a stable price environment. Monetary policy has remained tight and has supported a significant adjustment in the external sector. Mozambique’s reference lending rate is now amongst the highest in sub-Saharan Africa, however, and average commercial bank lending rates in the region of 30% are prohibitively high for much of the private sector. A stronger exchange rate, easing inflation, and lower credit levels suggest that the monetary policy cycle could begin to loosen as the economy continues to adjust. However, making this transition smoothly will require a coordinated and robust fiscal policy response.

    Without progress in the debt restructuring process to date, the country’s debt position remains untenable. The wage bill continues to be a significant source of pressure, whilst recent cuts to the investment budget are affecting the economic and social sectors, potentially worsening the composition of the budget. Fiscal risks, particularly from some of Mozambique’s large State-Owned Enterprises (SOEs), are materializing and may compromise recovery efforts if not managed proactively.

    Development Challenges

    Mozambique’s overarching development challenge is to translate its impressive performance in terms of economic growth to poverty reduction and improved development outcomes. While rapid growth and poverty reduction went largely hand in hand immediately after the civil war, the pace of poverty reduction slowed significantly after 2003. The explanation for this lies in the pattern of growth, which has been increasingly driven by large, capital intensive public and private investment projects with limited links to the rest of the economy. This has benefited relatively few people living in urban areas and has been accompanied by little sustained formal employment.

    The result has been increasing inequality and a markedly uneven distribution of poverty, left concentrated in rural areas and among illiterate female-headed households. The challenge is to diversify away from the current focus on capital-intensive projects and low-productivity subsistence agriculture toward a more diverse and competitive economy, all the while strengthening the key drivers of inclusion, such as improved quality education and health service delivery.

    Improving social indicators is also an important challenge. Malaria remains the most common cause of death in Mozambique, responsible for 35% of child mortality and 29% for the general population. HIV prevalence among adults shows a downward trend, stabilizing at a relatively high rate of 11.5%. In education, a 2013 national assessment revealed that only 6.3% of Grade 3 students show required reading skills. The social progress index for access to improved sources of water and sanitation ranks Mozambique 128th and 119th, respectively, out of 135 countries. Indeed, Mozambique has one of the lowest levels of water consumption in the world despite being endowed with a variety of water sources. 

    Last Updated: Oct 11, 2017

  • World Bank Group Engagement in Mozambique

    Since 1984, the World Bank Group (WBG) has been providing development assistance to Mozambique in accordance with the country’s needs and priorities, from economic stabilization in the 1980s, to post-war reconstruction in the early 1990s, to a comprehensive support strategy in the late 1990s. The current strategy, renamed the Country Partnership Framework (2017-20­20), involved close collaboration with the government, development partners, civil society, and the private sector.

    The International Development Association (IDA) lends money to Mozambique on concessional terms. This means that IDA credits have zero or very low interest and repayments are stretched over 25 to 40 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress. Under the new Fiscal Years 2017-2021 WBG strategy for Mozambique, the country will receive IDA support in the form of grants (which have zero interest), at least for FYs 2018 and 2019.

    The current IDA lending portfolio to Mozambique is large and diverse. As of September 2017, there are over 20 active IDA funded projects with an overall net commitment of approximately $1.7 billion in benefit of Mozambique. In addition, the country benefits from 26, recipient-executed trust funded operations with a total allocation of $190 million.

    The new 2017-2021 strategy, endorsed by the World Bank Board in April 2017, comes with renewed financing commitments. The indicative financing envelope under the new strategy is $1.7 billion from IDA. Approximately $120 million were available during FY17. From FY18 onward, an indicative IDA allocation in the range of $375 million per year is planned, subject to the annual IDA performance-based allocation and overall resource availability. IDA activities are complemented by those of the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).

    The IFC’s approach is to focus on strategic industries, namely, agribusiness, forestry, mining, energy, industry and financial services, and its interventions seek to address cross-cutting issues of: (i) supporting the mobilization of both local and foreign direct investment to key sectors of the economy; (ii) strengthening private sector access to finance; (iii) supporting the development of infrastructure; (iv) improving the investment climate; and (v) strengthening small and medium enterprises (SME) management capacity building. As for MIGA, it has investments under guarantees in Mozambique.

    Last Updated: Oct 11, 2017

  • Providing Low-cost Irrigation for Smallholder Farmers

    The World Bank is investing $70 million to help small farmers grow and sell rice and vegetables through rehabilitated and expanded irrigation schemes in the central provinces of Manica, Sofala, and Zambézia. Over 6,000 people have directly benefited from the Sustainable Irrigation Development Project (PROIRRI) so far.  At completion, the project is expected to ensure irrigation over a total of 3,000 hectares, of which 1,700 ha are dedicated to rice production, 800 ha for horticulture, and 500 ha for contract production.  http://www.worldbank.org/en/news/feature/2017/03/29/in-rural-mozambique-bank-funded-irrigation-systems-bring-back-life-and-hope-to-small-farmers

    Supporting Rural Electrification in Mozambique

    The World Bank supports the expansion of photovoltaic solar energy programs, connecting over 500 rural health centers and 300 schools throughout Mozambique. The $120 million International Development Association-funded project contributed to building new transmission lines and distribution networks, expanding access to electricity. The Bank also supports the use of environmental-friendly cooking stoves, which brings down pressure on wood fuels, reduces deforestation, and protects women and children against carbon monoxide and volatile particles emanating from coal. http://www.worldbank.org/en/news/feature/2017/03/01/world-bank-supports-rural-electrification-to-decisively-curb-poverty-in-mozambique

    Supporting Urban Development

    With support from the World Bank, an informal settlement that goes by the name George Dimitrov in Maputo, now has new drainage systems, paved access roads, new recreational spaces, and improvements in solid waste collection. An estimated 40,000 residents directly benefited from the upgrades, including 2,000 primary school children whose school has been totally rehabilitated. Improvements have also led to increased property tax revenue, and local businesses have grown to include more than 800 people, mostly women. http://www.worldbank.org/en/news/feature/2017/01/31/in-maputo-neighborhood-makeover-changes-residents-lives-better

    Last Updated: Oct 11, 2017

  • The World Bank Group (WBG) works closely with other development partners to improve the quality and effectiveness of development assistance to Mozambique. Collaboration with development partners has also focused on education, health, roads, and fiduciary and monitoring and evaluation.

    Last Updated: Oct 11, 2017

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PHOTO GALLERY

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In Depth

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REPORT Jul 31, 2017

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While extractives like coal are driving recovery in Mozambique, smaller businesses vital to productivity are struggling.

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Africa needs to improve the quality of its education and teach basic skills to adults, too, says Africa’s Pulse.

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International Development Association (IDA) in Africa

IDA, the World Bank’s fund for the poorest, contributes nearly 50% of its funds to 39 African countries.

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World Bank Africa Multimedia

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Doing Business in Mozambique

The Doing Business report provides objective measures of business regulations and their enforcement. See where your country ranks.

Additional Resources

Country Office Contacts

Main Office Contact
Av. Kenneth Kaunda, 1224
Maputo, Mozambique
+258-21-482-300
Maputo, Mozambique
Rafael Saute
Sr. Communications Officer
Av. Kenneth Kaunda, 1224
Maputo, Mozambique
+258-21-482-944
rsaute@worldbank.org
Washington
Thomas Buckley
Country Program Coordinator
1818 H Street NW
Washington, DC 20433
+1-202-473-0075
tbuckley@worldbank.org