Mozambique Economy  

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MOZAMBIQUE
GDP (2008): $18.95 billion.
Annual economic (GDP) growth rate (2008):6.5%.
Per capita income (2002.): $210.

Budget: Income ............... $2,786 million
Expenditure .... $3,108 million

Main Crops:
Cotton, cashew nuts, sugarcane, tea, cassava (tapioca), corn, rice, tropical fruits; beef, poultry.

Natural Resources:
Coal, titanium, natural gas .

Major Industries:
Food, beverages, chemicals (fertilizer, soap, paints), petroleum products, textiles, cement, glass, asbestos, tobacco .

NATIONAL GNP
Alleviating poverty. At the end of the civil war in 1992, Mozambique ranked among the poorest countries in the world. It still ranks among the least developed nations with very low socioeconomic indicators. In the last decade, however, it has experienced a notable economic recovery. Per capita GDP in 2000 was estimated at $222; in the mid-1980s, it was $120. With a high foreign debt (originally $5.7 billion at 1998 net present value) and a good track record on economic reform, Mozambique was the first African country to receive debt relief under the initial HIPC (Heavily Indebted Poor Countries) Initiative. In April 2000, Mozambique qualified for the Enhanced HIPC program as well and attained its completion point in September 2001. This led to the Paris Club members agreeing in November 2001 to substantially reduce the remaining bilateral debt. This led to the complete forgiveness of a considerable volume of bilateral debt. The United States has finished this process and forgiven Mozambique's debt.

Rebounding growth. The resettlement of war refugees and successful economic reform have led to a high growth rate: the average growth rate from 1993 to 1999 was 6.7%; from 1997 to 1999, it averaged more than 10% per year. The devastating floods of early 2000 slowed GDP growth to a 2.1%. A full recovery was achieved with growth of 14.8% in 2001. In 2003, the growth rate was 7%. The government projects the economy to continue to expand between 7%-10% a year for the next 5 years, although rapid expansion in the future hinges on several major foreign investment projects, continued economic reform, and the revival of the agriculture, transportation, and tourism sectors. More than 75% of the population engages in small scale agriculture, which still suffers from inadequate infrastructure, commercial networks, and investment. Yet 88% of Mozambique's arable land is still uncultivated; focusing economic growth in this sector is a major challenge for the government.

Low inflation. 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 1998-99. Economic disruptions stemming from the devastating floods of 2000 caused inflation to jump to 12.7% that year, and it was 13% in 2003. The value of Mozambique's currency, the Metical, lost nearly 50% of its value against the dollar since December 2000, although in late 2001 it began to stabilize. Since then, it has held steady at about MZM 24,000 to U.S.$1.

Extensive economic reform. Economic reform has been extensive. More than 1,200 state-owned enterprises (mostly small) have been privatized. Preparations for privatization and/or sector liberalization are underway for the remaining parastatals, including telecommunications, electricity, ports, and the railroads. The government frequently selects a strategic foreign investor when privatizing a parastatal. Additionally, customs duties have been reduced, and customs management has been streamlined and reformed. The government introduced a highly successful value-added tax in 1999 as part of its efforts to increase domestic revenues. Plans for 2003-04 include Commercial Code reform; comprehensive judicial reform; financial sector strengthening; continued civil service reform; and improved government budget, audit, and inspection capability.

Improving trade imbalance. Imports remain almost 40% greater than exports, but this is a significant improvement over the 4:1 ratio of the immediate post-war years. In 2003, imports were $1.24 billion and exports were $910 million. Support programs provided by foreign donors and private financing of foreign direct investment mega-projects and their associated raw materials, have largely compensated for balance-of-payments shortfalls. The medium-term outlook for exports is encouraging, since a number of foreign investment projects should lead to substantial export growth and a better trade balance. MOZAL, a large aluminum smelter that commenced production in mid-2000, has greatly expanded the nation's trade volume. Traditional Mozambican exports include cashews, shrimp, fish, copra, sugar, cotton, tea, and citrus fruits. Most of these industries are being rehabilitated. As well, Mozambique is less dependent on imports for basic food and manufactured goods because of steady increases in local production.

SADC trade protocol. In December 1999, the Council of Ministers approved the Southern African Development Community (SADC) Trade Protocol. The Protocol will create a free trade zone among more than 200 million consumers in the SADC region. The 10-year implementation process of the SADC Trade Protocol began in 2002 with the immediate elimination of duties on a large list of "zero" rated goods. In 2003, the top tariff rate was lowered from 30% to 25%. Mozambique has also joined the WTO.