Political and economic situation

Mozambique has been a multi-party democracy since 1990. Since the end of the civil war in 1992, the country has been one of the world’s fastest growing economies, with foreign investors attracted by untapped oil and gas, coal, and titanium reserves.

After recovering from severe floods and droughts in the early 2000s, Mozambique’s economy has performed strongly, with real GDP growth above 7% for over a decade. As a result of low exports and a decrease in public expenditure, due to ODA suspension and mounting public debt, as well as a decrease in foreign direct investment (-21% in 2015), GDP growth has decreased since 2015 to below 7%. For 2016, the Government of Mozambique estimated its GDP growth to reach just 4.5%. Over the same period, the inflation rate was expected to increase to 16.7%, limiting household purchasing power. In November 2016, Fitch ratings downgraded the country’s rating from CC to RD (Restricted Default).

As in previous years, the main drivers of growth were public expenditure and foreign direct investment, mainly in construction, power, business services, transport and communications, the financial sector and extractive industries. Poverty remains widespread, with more than 50% of Mozambicans living on less than USD 1 per day. With this in mind, the government has completely revised the legal and fiscal framework for the mining and hydrocarbon sectors, with a view to increasing revenues and enlarging domestic participation.

The lingering, low-intensity armed conflict between the government and the armed faction of the Resistência Nacional Moçambicana (RENAMO) had initially ended with a peace agreement in August 2014. Peaceful legislative and presidential elections were held in October of that year, after which Frente de Liberação de Moçambique (FRELIMO) emerged as the strongest party and its candidate Filipe Nyusi became President. However, renewed low-intensity conflict between the government and the RENAMO opposition party is on-going, with the latter not recognizing the outcome of the 2014 elections.