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Economy of Mozambique

Macroeconomic Review 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, Mozambique has experienced a notable economic recovery. Per capita GDP in 2008 was estimated at U.S. $956, a significant increase over the mid-1980s level of U.S. $120. With high foreign debt and a good track record on economic reform, Mozambique was the first African nation and sixth country worldwide to qualify for debt relief under the World Bank and International Monetary Fund (IMF) initial HIPC (Heavily Indebted Poor Countries) Initiative. In April 2000, Mozambique qualified for the Enhanced HIPC program and reached its completion point in September 2001. This led to the Paris Club members agreeing in November 2001 to substantially reduce the remaining bilateral debt, resulting in the complete forgiveness of a considerable volume of bilateral debt. The United States already finished the process and has forgiven Mozambique's debt. During their summit in Scotland in July 2005, the G8 nations agreed to significant multilateral debt relief for the world's least developed nations. On December 21, 2005, the IMF formalized the complete cancellation of all Mozambican IMF debt contracted prior to January 1, 2005, worth U.S. $153 million. In July 2006, the World Bank announced it was writing off $1.3 billion, all Mozambican debt to the World Bank contracted before January 1, 2005, as part of the Multilateral Debt Relief Initiative (MDRI). In 2007, under MDRI, the IMF wrote off $153 million in Mozambican debt, and the African Development Bank wrote off $370 million. As a result of the debt relief it has received, the Government of Mozambique’s outstanding debt stock has fallen from 25% of GDP in 2005 to under 12 % of GDP today, or well below debt distress thresholds according to the IMF. Mozambique’s GDP is $17.64 billion. Rebounding growth. The resettlement of civil war refugees, political stability, and continuing economic reforms have led to a high economic growth rate. Between 1994 and 2006, average annual GDP growth was approximately 8%. Mozambique achieved this growth rate even though the devastating floods of 2000 slowed GDP growth to 2.1%. As of 2008, the average growth rate was at 6.5%. Although the Bank of Mozambique projected relatively stable rates of 6.1% for 2009 and 6.3% for 2010, the IMF’s projections of a 4.5% average growth rate for 2009 and 5.5% for 2010 were generally accepted at year’s end. Future strong expansion requires continued economic reforms, major foreign direct investment, and the resurrection of the agriculture, transportation, and tourism sectors. Focusing on economic growth in the agricultural sector is a major challenge for the government. Although more than 80% of the population engages in small-scale agriculture, the sector suffers from inadequate infrastructure, commercial networks, and investment. However, a majority of Mozambique's arable land is still uncultivated, leaving room for considerable growth. 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% in 1998-1999. Economic disruptions resulting from the devastating floods of 2000 caused inflation to jump to 12.7% that year. The government is still working to bring inflation down to those lower numbers. In 2004 inflation was 9.1%; in 2005 it climbed to 11.2%; in 2006 it dropped back down to 9.4%. For the period of January-October 2009, the Ministry of Finance reported an inflation rate of 1.4%, which was down from 6.2% during the same period in the year prior. As of November 2009, the floating exchange rate was approximately 29.1 meticais per dollar. (Note: In July 2006 the government revised its currency, dropping three zeros. Thus a coin formerly worth 1,000 meticais was from then on worth only one metical. And thus, where a dollar previously had been worth, for example, 26,000 meticais, it was from July onward worth 26.) 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 value-added tax in 1999 as part of its efforts to increase domestic revenues. Improving trade imbalance. Mozambique imported $134 million in goods from the U.S. in 2008 ($213 million in 2007), mainly cereal, petroleum oils, and petroleum coke. Year to date exports from the U.S. are approximately $77 million. During the same period, Mozambique exported $9 million worth of goods to the U.S. ($17 million in 2007), and $26 million year to date for 2009. 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-payment shortfalls. The medium-term outlook for exports is encouraging, as a number of recent foreign investment projects have improved the trade balance. This export growth is expected to continue. MOZAL I, a large aluminum smelter that commenced production in mid-2000, greatly expanded Mozambique's trade volume. In April 2001, the International Finance Corporation (IFC) approved financing assistance for MOZAL II, which doubled overall production capacity. Phase two went online in April 2003, 5 months ahead of schedule, using primarily Mozambican workers during construction. Traditional Mozambican exports include cashews, shrimp, fish, copra, sugar, cotton, tea, and citrus and exotic fruits. Most of these industries are being rehabilitated. In addition, Mozambique is less dependent upon imports for basic food and manufactured goods as the result of steady increases in local production. Mozambique has taken little advantage of the African Growth and Opportunity Act, and overall U.S. import of Mozambican product has fluctuated wildly from $25 million in 1998 to $5 million in 2007. SADC trade protocol. In December 1999, the Mozambican 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. Implementation of the Protocol began in 2002 and had an overall zero-tariff target set for 2008; however, Mozambique's country-specific zero-tariff goal is currently 2015. Mozambique joined the World Trade Organization (WTO) on August 26, 1995. GDP: $17.64 billion. Annual economic (GDP) growth rate (2009): 4.5%. Per capita gross domestic product (2009): $465. Natural resources: Hydroelectric power, coal, natural gas, titanium ore, tantalite, graphite, iron ore, semi-precious stones, and arable land. Agriculture (21% of GDP; annual growth 7.9%): Exports --cotton, cashew nuts, sugarcane, tea, cassava (tapioca), corn, coconuts, sisal, citrus and tropical fruits, potatoes, sunflowers, beef and poultry. Domestically consumed food crops --corn, pigeon peas, cassava, rice, beef, pork, chicken, and goat. Industry (31% of GDP; annual growth 10%): Types --food, beverages, chemicals (fertilizer, soap, paints), aluminum, petroleum products, textiles, cement, glass, asbestos, and tobacco. Services (39.7% of GDP; annual growth 4.7%). Trade: Imports (2008)--$3.29 billion. Import commodities --machinery and equipment, vehicles, fuel, chemicals, metal products, foodstuffs and textiles. Main suppliers --South Africa, Netherlands, Portugal. Exports (2008)--$2.7 billion. Export commodities --aluminum, cashews, prawns, cotton, sugar, citrus, timber, bulk electricity, natural gas. Main markets --Belgium, South Africa, Zimbabwe.

Geography of Mozambique

Location: Southern Africa, bordering the Mozambique Channel, between South Africa and Tanzania Map references: Africa Area: total area: 801,590 sq km land area: 784,090 sq km comparative area: slightly less than twice the size of California Land boundaries: total 4,571 km, Malawi 1,569 km, South Africa 491 km, Swaziland 105 km, Tanzania 756 km, Zambia 419 km, Zimbabwe 1,231 km Coastline: 2,470 km Maritime claims: exclusive economic zone: 200 nm territorial sea: 12 nm International disputes: none Climate: tropical to subtropical Terrain: mostly coastal lowlands, uplands in center, high plateaus in northwest, mountains in west Natural resources: coal, titanium Land use: arable land: 4% permanent crops: 0% meadows and pastures: 56% forest and woodland: 20% other: 20%
Irrigated land: 1,150 sq km (1989 est.) Environment: current issues: civil strife and recurrent drought in the hinterlands have resulted in increased migration to urban and coastal areas with adverse environmental consequences; desertification; pollution of surface and coastal waters natural hazards: severe droughts and floods occur in central and southern provinces; devastating cyclones international agreements: party to - Endangered Species, Ozone Layer Protection; signed, but not ratified - Biodiversity, Climate Change, Law of the Sea

Government of Mozambique

Mozambique is a constitutional democracy with an estimated population of 20 million. The Front for the Liberation of Mozambique (FRELIMO) has been the ruling political party since independence in 1975, heavily influencing both policymaking and implementation. While civilian authorities generally maintain effective control of the security forces, there have been some instances in which elements of the security forces acted independently. In 1994 the country held its first democratic elections. Joaquim Chissano was elected President with 53% of the vote, and a 250-member National Assembly was voted in with 129 FRELIMO deputies, 112 RENAMO deputies, and 9 representatives of three smaller parties that formed the Democratic Union (UD). By 1999, more than one-half (53%) of the legislation passed originated in the Assembly. After some delays, in 1998 the country held its first local elections to provide for local representation and some budgetary authority at the municipal level. The principal opposition party, RENAMO, boycotted the local elections, citing flaws in the registration process. Independent slates contested the elections and won seats in municipal assemblies. Turnout was very low. In the aftermath of the 1998 local elections, the government resolved to make more accommodations to the opposition's procedural concerns for the second round of multiparty national elections in 1999. Working through the National Assembly, the electoral law was rewritten and passed by consensus in December 1998. Financed largely by international donors, a very successful voter registration was conducted from July to September 1999, providing voter registration cards to 85% of the potential electorate (more than 7 million voters). The second general elections were held December 3-5, 1999, with high voter turnout. International and domestic observers agreed that the voting process was well organized and went smoothly. Both the opposition and observers subsequently cited flaws in the tabulation process that, had they not occurred, might have changed the outcome. In the end, however, international and domestic observers concluded that the close result of the vote reflected the will of the people. The second local elections, involving 33 municipalities with some 2.4 million registered voters, took place in November 2003. This was the first time that FRELIMO, RENAMO-UE, and independent parties competed without significant boycotts. The 24% turnout was well above the 15% turnout in the first municipal elections. FRELIMO won 28 mayoral positions and the majority in 29 municipal assemblies, while RENAMO won 5 mayoral positions and the majority in 4 municipal assemblies. The voting was conducted without violent incidents. However, the period immediately after the elections was marked by objections about voter and candidate registration and vote tabulation, as well as calls for greater transparency. The third general elections occurred on December 1-2, 2004. FRELIMO candidate Armando Guebuza won with 64% of the popular vote. His opponent, Afonso Dhlakama of RENAMO, received 32% of the popular vote. The estimated 44% turnout was well below the almost 70% turnout in the 1999 general elections. FRELIMO won 160 seats in parliament. A coalition of RENAMO and several small parties won the 90 remaining seats. Armando Guebuza was inaugurated as the President of Mozambique on February 2, 2005. Elections in Mozambique’s 43 municipalities took place on November 19, 2008. FRELIMO mayoral candidates won in 42 of the 43 contests. On October 28, 2009 Mozambique held simultaneous presidential, legislative, and provincial assembly elections. The results were much the same as 2004 with FRELIMO candidate Armando Guebuza winning 75% of the presidential vote and Afonso Dhlakama of RENAMO coming in second with nearly 14%; 9.28% of the votes were won by Daviz Simango of the Democratic Movement of Mozambique (MDM). Of 248 parliamentary seats, FRELIMO won 192, RENAMO 48, and MDM 8. Formed in early 2009 by incumbent Mayor of Beira and former RENAMO rising star Daviz Simango, MDM represented the largest new face in the 2009 elections. Almost 2 months prior to election day, the National Elections Commission (CNE) released the list of eligible parties for the three races. Alleging missing registration documentation, CNE excluded multiple opposition parties, most notably MDM, from running in the National Assembly and provincial assembly electoral process. MDM, now excluded from 7 of 11 provinces due to CNE’s decision, appealed to the Mozambican Constitutional Council, which in turn upheld CNE’s ruling. Amidst rumors of FRELIMO ties to both the Constitutional Council and CNE, the donor community voiced unified concern regarding the transparency of Mozambique’s multi-party elections and continues to work with the Government of Mozambique to further electoral reform. Election day itself was considered well-run, peaceful, and generally well-organized, and most scrutiny was directed toward the pre-election decisions by the CNE and Constitutional Council. However, as a result of the irregularities in the election process, Freedom House removed Mozambique from its list of electoral democracies. Despite the government's strong anticorruption rhetoric, corruption in the executive and legislative branches was widely perceived to be endemic in 2009. The World Bank's Worldwide Governance Indicators reflected that corruption was a serious problem, with no change in ranking from the previous year. For the second year running, the country dropped in Transparency International's 2009 Corruption Perception Index (from 126 to 130), indicating that corruption remained rampant. Petty corruption by low-level government officials to supplement low incomes, and high-level corruption by a small group of politically and economically connected elites continued to be the norm. Corruption largely resulted from a lack of checks and balances, minimal accountability, and a culture of impunity. Local non-governmental organizations (NGOs), such as the Center for Public Integrity, and media groups continued to be the main civic forces fighting corruption, reporting and investigating numerous corruption cases. The law requires that all members of the government declare and deposit their assets with the Constitutional Council, but does not require that such information be made available to the general public. Principal Government Officials President--Armando Guebuza Prime Minister--Aires Bonifácio Baptista Ali Minister of Foreign Affairs and Cooperation--Oldemiro Baloi Minister of Finance--Manuel Chang Minister of National Defense--Filipe Jacinto Nyussi Minister of the Interior--Jose Pacheco Minister of Industry and Commerce--Antonio Fernando Minister of Justice--Maria Benvinda Levi Minister of Agriculture--Soares Nhaca Minister in the Presidency for Diplomatic Affairs--Francisco Caetano Madeira Mozambique maintains an embassy in the United States at 1990 M Street, NW, Suite 570, Washington, DC 20036; tel: 202-293-7146. Government Type: Multi-party democracy. Independence: June 25, 1975. Constitution: November 1990. Branches: Executive--President, Council of Ministers. Legislative--National Assembly, municipal assemblies. Judicial--Supreme Court, provincial, district, and municipal courts. Administrative subdivisions: 10 provinces, 224 districts, and 33 municipalities, of which Maputo City is the largest. Political parties: Front for the Liberation of Mozambique (FRELIMO); Mozambican National Resistance (RENAMO); numerous small parties. Suffrage: Universal adult, 18 years and older.

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History of Mozambique

Mozambique's first inhabitants were San hunter and gatherers, ancestors of the Khoisani peoples. Between the first and fourth centuries AD, waves of Bantu-speaking peoples migrated from the north through the Zambezi River valley and then gradually into the plateau and coastal areas. The Bantu were farmers and ironworkers. When Portuguese explorers reached Mozambique in 1498, Arab-trading settlements had existed along the coast and outlying islands for several centuries. From about 1500, Portuguese trading posts and forts became regular ports of call on the new route to the east. Later, traders and prospectors penetrated the interior regions seeking gold and slaves. Although Portuguese influence gradually expanded, its power was limited and exercised through individual settlers who were granted extensive autonomy. As a result, investment lagged while Lisbon devoted itself to the more lucrative trade with India and the Far East and to the colonization of Brazil. By the early 20th century the Portuguese had shifted the administration of much of the country to large private companies, controlled and financed mostly by the British, which established railroad lines to neighboring countries and supplied cheap--often forced--African labor to the mines and plantations of the nearby British colonies and South Africa. Because policies were designed to benefit white settlers and the Portuguese homeland, little attention was paid to Mozambique's national integration, its economic infrastructure, or the skills of its population. After World War II, while many European nations were granting independence to their colonies, Portugal clung to the concept that Mozambique and other Portuguese possessions were overseas provinces of the mother country, and emigration to the colonies soared. Mozambique's Portuguese population at the time of independence was about 250,000. The drive for Mozambican independence developed apace, and in 1962 several anti-colonial political groups formed the Front for the Liberation of Mozambique (FRELIMO), which initiated an armed campaign against Portuguese colonial rule in September 1964. After 10 years of sporadic warfare and major political changes in Portugal, Mozambique became independent on June 25, 1975. The last 30 years of Mozambique's history have reflected political developments elsewhere in the 20th century. Following the April 1974 coup in Lisbon, Portuguese colonialism collapsed. In Mozambique, the military decision to withdraw occurred within the context of a decade of armed anti-colonial struggle, initially led by American-educated Eduardo Mondlane, who was assassinated in 1969. When independence was achieved in 1975, the leaders of FRELIMO's military campaign rapidly established a one-party state allied to the Soviet bloc and outlawed rival political activity. FRELIMO eliminated political pluralism, religious educational institutions, and the role of traditional authorities. The new government gave shelter and support to South African (ANC) and Zimbabwean (ZANU) liberation movements while the governments of first Rhodesia and later apartheid South Africa fostered and financed an armed rebel movement in central Mozambique called the Mozambican National Resistance (RENAMO). Civil war, sabotage from neighboring states, and economic collapse characterized the first decade of Mozambican independence. Also marking this period were the mass exodus of Portuguese nationals, weak infrastructure, nationalization, and economic mismanagement. During most of the civil war, the government was unable to exercise effective control outside of urban areas, many of which were cut off from the capital. An estimated 1 million Mozambicans perished during the civil war, 1.7 million took refuge in neighboring states, and several million more were internally displaced. In the third FRELIMO party congress in 1983, President Samora Machel conceded the failure of socialism and the need for major political and economic reforms. He died, along with several advisers, in a suspicious 1986 plane crash. His successor, Joaquim Chissano, continued the reforms and began peace talks with RENAMO. The new constitution enacted in 1990 provided for a multi-party political system, market-based economy, and free elections. The civil war ended in October 1992 with the Rome General Peace Accords. Under supervision of the ONUMOZ peacekeeping force of the United Nations, peace returned to Mozambique. By mid-1995 the more than 1.7 million Mozambican refugees who had sought asylum in neighboring Malawi, Zimbabwe, Swaziland, Zambia, Tanzania, and South Africa as a result of war and drought had returned, as part of the largest repatriation witnessed in Sub-Saharan Africa. Additionally, a further estimated 4 million internally displaced returned to their areas of origin.

People of Mozambique

Mozambique's major ethnic groups encompass numerous subgroups with diverse languages, dialects, cultures, and histories. Many are linked to similar ethnic groups living in neighboring countries. The north-central provinces of Zambezia and Nampula are the most populous, with about 45% of the population. The estimated 4 million Makua are the dominant group in the northern part of the country--the Sena and Ndau are prominent in the Zambezi valley, and the Tsonga and Shangaan dominate in southern Mozambique. Despite the influence of Islamic coastal traders and European colonizers, the people of Mozambique have largely retained an indigenous culture based on small-scale agriculture. Mozambique's most highly developed art forms have been wood sculpture, for which the Makonde in northern Mozambique are particularly renowned, and dance. The middle and upper classes continue to be heavily influenced by the Portuguese colonial and linguistic heritage. During the colonial era, Christian missionaries were active in Mozambique, and many foreign clergy remain in the country. According to the national census, about 40% of the population is Christian, at least 20% is Muslim, and the remainder adheres to traditional beliefs. Under the colonial regime, educational opportunities for black Mozambicans were limited, and 93% of that population was illiterate. In fact, most of today's political leaders were educated in missionary schools. After independence, the government placed a high priority on expanding education, which reduced the illiteracy rate to about two-thirds as primary school enrollment increased. Unfortunately, in recent years school construction and teacher training enrollments have not kept up with population increases. With post-war enrollments reaching all-time highs, the quality of education has suffered. Nationality: Noun and adjective--Mozambican(s). Population (2009 est.): 20.226 million; 48.2% male and 51.8% female. Population annual growth rate (2009): 1.9%. Ethnic groups: Makhuwa, Tsonga, Makonde, Shangaan, Shona, Sena, Ndau, and other indigenous groups, and approximately 10,000 Europeans, 35,000 Euro-Africans, and 15,000 South Asians. Religions: Christian 40%, Muslim 20%, indigenous African and other beliefs 40% (1997 census--recent estimates give a higher Muslim percentage). Languages: Portuguese (official), various indigenous languages. Education: Mean years of schooling (adults over 25): men 2.1, women 1.2. Primary net enrollment rate (2005)--78%. Adult illiteracy rate (2008)--52.2%. Health: Infant mortality rate (2007)--115/1,000. Life expectancy (2007)--42.07 years. Work force (9.4 million est. 2006): Agriculture--81%; industry--6%; services--13% (1997 estimate).