Country Report Mozambique September 2017

Country Report Mozambique September 2017

  • September 2017 •
  • Report ID: 2557455

Outlook for 2017-21

  • The ruling party, Frelimo, is forecast to remain in power, under the leadership of Filipe Nyusi. We expect it to secure re-election in the 2019 polls, but a power struggle between rival factions of Frelimo will stoke political volatility.
  • Tensions between Frelimo and Renamo (an elected party and an armed rebel movement) will further weaken stability, amid protracted talks over political decentralisation and military reform.
  • A liquidity crisis, triggered by an unmanageable debt burden and widespread aid freezes will continue to destabilise the economy. We expect external debt to be restructured (eventually), but capital inflows will be slow to recover.
  • Fiscal policy will in the near term focus on cushioning the impact of the economic crisis on Mozambicans' livelihoods. However, with this strategy proving unsustainable, we expect tighter policy to be pursued from 2018.
  • Real GDP growth will remain weak (by historical standards) in 2017-18, owing to fragile domestic demand and low investment. A more robust economic recovery is forecast thereafter, driven by the development of the gas industry.
  • We forecast that the current-account deficit will contract, to 19.1% of GDP in 2018, as financing constraints slow import growth and higher coal output lifts exports. The deficit will widen thereafter as import demand strengthens.


  • Mr Nyusi met Afonso Dhlakama, the leader of Renamo, in August for the first time since 2015. This was welcomed by the International Contact Group (which is distantly overseeing the peace process) as a breakthrough.
  • In an interview with the local media in late August, Mr Dhlakama set out his expectations that a package of new laws on decentralisation will be presented to parliament before end-2017 and approved before elections in 2019.
  • The government has announced plans to establish a sovereign investment fund, with tax earnings from capital gains windfalls. Few details are available about how this will work in practice.
  • Banco de Moçambique (the central bank) reduced its benchmark lending rate by 25 basis points to 22.5% in August, thereby furthering a cautious monetary loosening cycle that began in March.
  • The state-owned utility, Electricidade de Moçambique (EDM), raised electricity prices by 35-42%, effective from August 15th. This marks the most substantial rise in several years, but tariffs are probably still too low to cover EDM's costs.
  • The Chókwè Agro-Industrial Complex, in Gaza province-which is majority-owned by the state's Instituto de Gestão e Participação do Estado-has ceased production, due to a lack of agricultural supplies and funding.


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