Economy of Mozambique

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Economy of Mozambique

IMF, WTO, Group of 77
Country group	Least Developed[1] Low-income economy[2]
Statistics
GDP	$14.396 billion (nominal, 2018 est.)[3] $39.183 billion (PPP, 2018 est.)[3]
GDP growth	3.7% (2017) 3.4% (2018) 2.0% (2019e) 3.7% (2020f)[4]
GDP per capita	$475 (nominal, 2018 est.)[3] $1,292 (PPP, 2018 est.)[3]
GDP by sector	agriculture: 29.5% industry : 23.9% services : 46.5% (2012 est.)
Inflation (CPI)	3.911% (2018)[3]
Population below poverty line	52% (2009 est.)
Human Development Index	0.446 low (2021)[5] (185th) 0.300 low IHDI (2021)[6]
Labour force	10.1 million (2012 est.)
Labour force by occupation	agriculture: 77% industry: 8% Tertiary sector
Unemployment	17% (2007 est.)
Main industries	aluminum, coal, bulk electricity, lumber, cotton, prawns, cashews, sugar, citrus
Main export partners	South Africa 30.5%  Italy 9.8%  China 9.4%  Belgium 8%  Spain 6.1%  Egypt 5.1% (2013 est.)[7]
Imports	$6.167 billion (2012 est.)
Import goods	machinery, vehicles, metal products, textiles, food
Main import partners	South Africa 26%  India 13.9%  China 12.6%  Portugal 4.5%  Australia 4.3% (2013 est.)[8]
Gross Fitch:[10] B Outlook: Stable
Foreign reserves	$2.77 billion (31 December 2012 est.)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars .

The economy of Mozambique is $14.396 billion by gross domestic product as of 2018, and has developed since the end of the Mozambican Civil War (1977–1992). In 1987, the government embarked on a series of macroeconomic reforms, which were designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Inflation was brought to single digits during the late 1990s, although it returned to double digits in 2000–02. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities.

In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual

The Portuguese rule

Although the

Mozambique became an independent state in 1975. The exodus of trained Portuguese and the eruption of the

The political pressure of the ideologically charged civil war, in conjunction with the excruciating need for aid and funds to finance imports, compelled FRELIMO to negotiate its first structural adjustment package (SAP) with the World Bank and the International Monetary Fund (IMF) in 1986 (commonly referred to as the Bretton Woods Institutions or International Financial Institutions—IFIs). The series of SAPs that followed thereafter, required privatization of major industries, less government spending, deregulation of the economy, and trade liberalization. The SAPs, therefore, have essentially focused on the implementation of an unfettered free market economy.

Today, the economy of Mozambique continues to be dominated by agriculture. Major exports include prawns, cotton, cashew nuts, sugar, citrus, copra and coconuts, and timber. Export partners, in turn, include Spain, South Africa, Portugal, the United States, Japan, Malawi, India, and Zimbabwe. Imports, such as farm equipment and transport equipment, are capital goods that are worth more than agricultural products, hence Mozambique's large trade deficit. The country also imports food, clothing, and petroleum products. Import partners include South Africa, Zimbabwe, Saudi Arabia, Portugal, the United States, Japan, and India. In the past several years, the value of imports outweighed the value of exports by 5 to 1 or more—a factor that obliges Mozambique to depend heavily on foreign aid and loans by foreign commercial banks and the Bretton Woods Institutions (BWIs). In 1995 alone, Mozambique received $1.115 billion in aid. In 1999, the total external debt stood at $4.8 billion. Fortunately, in the same year significant economic recovery did occur, as the real GDP growth rate reached 10 percent.

Sectors

All economic sectors ranging from manufacturing and agriculture to tourism and finance, declined sharply after independence from Portugal in 1975, but picked up in the 2000s after the end of the Mozambican Civil War, although they are still performing well below potential.

Gas and oil reserves

Recent oil and gas discoveries across East Africa, most notably in

The discoveries have driven billions of dollars in annual investment to the region.^[11] According to BMI estimates, the finds in the last few years are more than that of any other region in the world, and the discoveries are expected to continue for the next few years.^[12][13]

Agriculture, fishing and forestry

In Mozambique,

Agricultural potential is high, particularly in the fertile northern regions, which accounts for the bulk of the country's agricultural surplus. The main cash crops are sugar, copra, cashew nuts, tea, and tobacco. Total sugar production was expected to rise by 160% in the 2000s, which would make the country a major net exporter for the first time since independence. All the plantations and refineries have been privatized. Marine products, particularly prawns, are Mozambique's largest single export. There is an abundance of marine resources that are not fully exploited. After the Mozambican Civil War, the return of internally displaced persons and the gradual restoration of rural markets have enabled Mozambique to increase agricultural production dramatically.

Mozambique produced, in 2018:

• 8.5 million tons of cassava (9th largest producer in the world);
• 3 million tons of sugarcane;
• 1.6 million tons of maize;
• 625 thousand tons of sweet potato;
• 578 thousand tons of banana;
• 343 thousand tons of
  tomatoes
  ;
• 273 thousand tons of potato;
• 227 thousand tons of coconut;
• 138 thousand tons of onion;
• 134 thousand tons of rice;
• 108 thousand tons of
  cashew nuts
  (11th largest producer in the world);
• 107 thousand tons of peanut;
• 93 thousand tons of tobacco;
• 90 thousand tons of sorghum;
• 89 thousand tons of cowpea;
• 85 thousand tons of
  castor bean
  ;
• 66 thousand tons of pineapple;
• 65 thousand tons of
  sesame seed
  ;
• 50 thousand tons of
  beans
  ;
• 48 thousand tons of cotton;

In addition to smaller productions of other agricultural products.^[15]

Food security, vulnerability and risk management

Mining and semi-processing

There are large mineral deposits, but exploration has been constrained by the civil war (1977–1992) and poor infrastructure. The World Bank has estimated that there was the potential for exports worth US$200m by 2005 – in the late 1990s they totaled US$3.6m, some 1% of total exports, and a contribution of less than 2% of GDP. Minerals currently being mined include marble, bentonite, coal, gold, bauxite, granite, titanium and gemstones. Illegal exports from artisanal production are estimated at US$50 million.^{[original research?]}

Mozambique exported its first batch of coal in 2011 and expects to become the world's largest coal exporter. It is also spending about US$50 billion in infrastructure projects to access its coal reserves. Mozambique is reported to have the fourth largest reserves of natural gas in the world, after Russia, Iran, and Qatar.^[20]

Manufacturing

Although very well developed during the 1960s and early 1970s, industrialisation declined rapidly with the withdrawal of most Portuguese after independence. Since 1995 production has increased sharply and was expected to grow by 33% in 2001 due to the expansion (costing US$860m) of the Mozal aluminium smelter which was approved in mid-2001. The country's largest ever foreign investment, Mozal has little impact on employment, but is making a substantial contribution to balance of payments through taxes generated. Exports generated in the first quarter of 2001 were worth US$85.3, the primary factor for the 172% expansion in Mozambique's exports for the period. Completion of the smelter resulted in aluminium accounting for up to 70% of exports. Construction materials, agricultural processing, beverages, and consumer goods were the main sub-sectors.

Tourism

This sector declined sharply after independence from

Telecommunication

Immediately after a long civil war ended in 1992 the country started to reform telecommunication sector. The mobile sub-sector has experienced excellent growth rates following the introduction of competition in 2003 between Vodacom Mozambique and mCel, the incumbent mobile subsidiary of the national telco, Telecomunicações de Moçambique (TDM). The government is intent on introducing competition to the fixed-line sector as well, but it is hesitating to privatise TDM. All other services are open to competition, subject to licensing by the industry regulator, INCM. Internet usage in the country has been hampered by the inadequate fixed-line infrastructure and the high cost of international bandwidth, but this market sector has started to accelerate following the introduction of various kinds of broadband services including ADSL, cable modems, WiMAX wireless broadband and mobile data services, and then the landing of the first international submarine fibre optic cable in the country (SEACOM) in 2009. Further improvements can be expected from the ongoing rollout of 3G mobile services and a national fibre backbone network as well as the landing of the second international fibre (EASSy) in 2010. The lower cost of bandwidth has already started to trickle down to lower consumer prices in some service segments, while others have remained unchanged.

Finance

The banking system, dominated by the Portuguese collapsed after independence in 1975. From an earlier position (in the 1980s) of central government control of the economy, Mozambique has initiated rapid reforms in recent years, accelerating the implementation of market-based economic policies, and committing to a policy of fiscal and monetary discipline. In 1995 the government introduced its medium-term economic growth, strategy which it continues to pursue. Since the late 1990s, both national and international banking, established an environment for rapid economic growth and development of the financial system. On 11 December 2012, the Mozambican Government acquire the Portuguese shares of BNI Banco Nacional de Investimento, owning 100% of the bank and turning it into the country's development bank^[21] and nominated a former Governor of the Bank of Mozambique, Adriano Maleiane as CEO.^[22]

Macroeconomic review

Alleviating

The following table shows the main economic indicators in 1980–2017.[24]

Rebounding growth

The resettlement of

The government's tight control of spending and the money supply, combined with financial sector reform, successfully reduced inflation from 70% in 1994 to less than 5% from 1998 to 1999. Rates spiked in 2000, however, to a rate of 12.7% due to economic disruptions stemming from the devastating floods.[23] Starting 2001 the inflation was in the range of 5%-12%.

2003 - 5.2%; 2004 - 7.5%; 2005 - 7.6%; 2006 - 11.8%; 2007 - 7.4%; 2008 - 8.4%; 2009 - 4.2%; 2010 - 10.0%; 2011 - 11.1%

Extensive economic reform

Exports - commodities: aluminum, prawns, cashews, cotton, sugar, citrus, timber; bulk electricity

Exports - partners: India 28.1%, Netherlands 24.4%, South Africa 16.7% (2017)

Imports: $5.021 billion (2017 est.)

Imports - commodities: machinery and equipment, vehicles, fuel, chemicals, metal products, foodstuffs, textiles

Imports - partners: South Africa 36.8%, China 7%, UAE 6.8%, India 6.2%, Portugal 4.4% (2017)

Debt - external: $10.27 billion (31 December 2017 est.)

Currency: 1 metical (Mt) = 100 centavos

Exchange rates: meticais (MZM) per US dollar - 24.125 (2008 est.), 26.264 (2007), 25.4 (2006)

Fiscal year: calendar year

See also

• Economy of South Africa
• List of companies based in Mozambique
• Transportation in Mozambique
• United Nations Economic Commission for Africa

References