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publicationJune 22, 2022

Mozambique Country Economic Memorandum: Mozambique Needs a New Growth Model for Sustained, Inclusive Development

Mozambique CEM

Mozambique Country Economic Memorandum: Reigniting Growth for All, October 2021

The latest World Bank Mozambique Country Economic Memorandum, Reigniting Growth for All, analyzes the key constraints and opportunities to achieving sustained and more inclusive growth in the country, and provides policy options for the way forward.

Key Messages

  • Mozambique has experienced rapid growth for more than two decades. Growth accelerated remarkably following the end of the civil war, averaging 7.9% between 1993 and 2015—among the highest in sub-Saharan Africa (SSA).
  • However, growth decelerated sharply following the hidden debt crisis in 2016. The revelation of undisclosed debts led to a crisis of economic governance and a protracted economic slowdown, with growth falling to 3% in 2016-2019. The slowdown has been exacerbated by the natural disasters in 2019, the escalation of insurgency in Northern Mozambique since 2017, and the pandemic since 2020.
  • Mozambique’s growth strategy has been limited in its capacity to generate productive jobs and support accelerated poverty reduction. Nearly two-thirds of the population lives in poverty and the country is among the most unequal in SSA. This partly resulted from Mozambique’s increased dependence on large extractive projects, with limited linkages with the rest of the economy, and low-productivity agriculture.
  • The discovery of some of the largest natural gas (LNG) reserves in the world is expected to provide Mozambique with a transformative opportunity for sustained and inclusive growth. However, making the most of the anticipated LNG resources and bringing growth closer to the poor will require a new ambitious growth model that goes beyond the extractives.
  • The Mozambique Country Economic Memorandum (CEM) report provides recommendations to set the country into a path of diversified, inclusive, and sustained growth. This includes: (i) making the best use of the non-renewable natural resource revenues, which includes putting in place an adequate policy and institutional framework well ahead of the revenue windfalls from the LNG sector; and (ii) promoting growth in non-extractive sectors, accompanied by spatial transformation, and improved agricultural productivity.

This report was prepared by a team led by Shireen Mahdi (Lead Country Economist, ELCDR), and Fiseha Haile (Senior Economist, EAEM1). The report was supported by the generous financial support from the Foreign Commonwealth and Development Office (FCDO former UK Government Department for International Development -DFID). It also benefited from the Umbrella Facility for Trade Trust Fund.”