Mozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and eSwatini. Its long Indian Ocean coastline of 2,500 kilometers faces east to Madagascar.
About two-thirds of its population of more than 29 million (2018) live and work in rural areas. It is endowed with ample arable land, water, energy, as well as mineral resources and newly discovered natural gas offshore; three, deep seaports; and a relatively large potential pool of labor. It is also strategically located; four of the six countries it borders are landlocked, and hence dependent on Mozambique as a conduit to global markets. Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance of its economic, political, and social development to the stability and growth of Southern Africa as a whole.
The Front for the Liberation of Mozambique (Frelimo) and the Mozambican National Resistance (Renamo) remain the country’s main political forces, followed by the Mozambique Democratic Movement (MDM). Renamo has maintained a considerable arsenal and military bases after the peace accord of 1992, and ever since the end of the civil war, the country has registered flare-ups of armed confrontations and violence. A new peace accord was reached in August 2019, and has been violated several times by a Renamo breakaway military faction known as Military Junta. The new peace deal aimed at achieving greater pacification of the country by integrating Renamo residual fighters into the national army, and dismantling Renamo military bases splattered around the country. Meanwhile, the government is grappling with another so-called Islamic insurgency in parts of the gas-rich province of Cabo-Delgado. Initially circumscribed to one locality, the indiscriminate killing of civilians perpetrated by the insurgents has now spread to other districts and towns in the province. Recently (March 2020) the rebels attacked and occupied successively the transport hub rural town of Mocimboa da Praia and the town of Quissinga. Recent estimates show the conflict has killed more than 1,000 people and forced 100,000 from their homes. The risk that violence can spread to other areas of the country should not be underestimated.
Presidential, legislative, and provincial elections were held across the country on October 15, 2019, completing the country’s sixth successive general elections since the introduction of multiparty elections in 1994. The incumbent party, Frelimo, won the presidency and the national parliament in a landslide. Frelimo also secured a majority in all 10 provinces, thus electing governors for each province.
The COVID-19 (coronavirus) pandemic reached Mozambique at a weak moment in its economic history, as the country attempted to recover from two major shocks: the hidden debt crisis and the devastating effects of cyclones Idai and Kenneth in 2019.
In 2016, Mozambique’s track record for high growth was disrupted when large, previously unreported external borrowing came to light. The revelation of undisclosed debt dented confidence in the country, increased debt levels, and more than halved the average rate of growth. In 2019, Cyclones Idai and Kenneth caused massive damage to infrastructure and livelihoods, further lowering growth and wellbeing of the population.
The pandemic presents a further setback on the country’s economic prospects. The pandemic dims the short-term growth prospects of Mozambique. The COVID-19 crisis will have a heavy impact on economic activity as social distancing and travel restrictions (domestically and globally) affect demand for goods and services. At the same time, reduced demand and prices of commodities are slowing the pace of investment in gas and coal, two key industries for Mozambique. With this, growth is expected to decline to 1.3% in 2020, down from a pre-COVID forecast of 4.3%, with significant downside risks. Mozambique is also expected to experience large external and fiscal financing gaps in 2020 and 2021 in a context characterized by exposure to external shocks and limited fiscal space.
The country’s main challenges include maintaining the macroeconomic stability considering exposure to commodity price fluctuations, and reestablishing confidence through improved economic governance and increased transparency, including the transparent handling of the hidden debt investigation. Moreover, structural reforms are needed in support of the currently struggling private sector.
Another major challenge is diversifying the economy by moving away from the current focus on capital-intensive projects and low-productivity subsistence agriculture, while strengthening the key drivers of inclusion, such as improved quality education and health service delivery, which could in turn improve social indicators.
Last Updated: Jul 02, 2020