________________________________________________________________________________

Country Report

Mozambique

Generated on November 18th 2019

Economist Intelligence Unit
20 Cabot Square
London E14 4QW
United Kingdom

________________________________________________________________________________
The Economist Intelligence Unit
The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing
operations across national borders. For 60 years it has been a source of information on business
developments, economic and political trends, government regulations and corporate practice worldwide.
The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where
the latest analysis is updated daily; through printed subscription products ranging from newsletters to
annual reference works; through research reports; and by organising seminars and presentations. The
firm is a member of The Economist Group.
London New York
The Economist Intelligence Unit The Economist Intelligence Unit
20 Cabot Square The Economist Group
London 750 Third Avenue
E14 4QW 5th Floor
United Kingdom New York, NY 10017, US
Tel: +44 (0) 20 7576 8181 Tel: +1 212 541 0500
Fax: +44 (0) 20 7576 8476 Fax: +1 212 586 0248
E-mail: eiucustomerservices@eiu.com E-mail: eiucustomerservices@eiu.com

Hong Kong Geneva

The Economist Intelligence Unit The Economist Intelligence Unit
1301 Cityplaza Four Rue de l’Athénée 32
12 Taikoo Wan Road 1206 Geneva
Taikoo Shing Switzerland
Hong Kong
Tel: +852 2585 3888 Tel: +41 22 566 24 70
Fax: +852 2802 7638 Fax: +41 22 346 93 47
E-mail: eiucustomerservices@eiu.com E-mail: eiucustomerservices@eiu.com

This report can be accessed electronically as soon as it is published by visiting store.eiu.com or by

contacting a local sales representative.
The whole report may be viewed in PDF format, or can be navigated section-by-section by using the
HTML links. In addition, the full archive of previous reports can be accessed in HTML or PDF format,
and our search engine can be used to find content of interest quickly. Our automatic alerting service
will send a notification via e-mail when new reports become available.

Copyright

© 2019 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any
part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The
Economist Intelligence Unit Limited.
All information in this report is verified to the best of the author's and the publisher's ability. However,
the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.
ISSN 2047-5373

Symbols for tables

"0 or 0.0" means nil or negligible;"n/a" means not available; "-" means not applicable
Mozambique 1

Mozambique
Summary
2 Briefing sheet

Outlook for 2020-24

4 Political stability
4 Election watch
5 International relations
6 Policy trends
7 Fiscal policy
7 Monetary policy
8 International assumptions
9 Economic growth
9 Inflation
10 Exchange rates
10 External sector
10 Forecast summary

Data and charts

11 Annual data and forecast
12 Quarterly data
12 Monthly data
13 Annual trends charts
14 Monthly trends charts
15 Comparative economic indicators

Summary
15 Basic data
17 Political structure

Recent analysis
Politics
20 Forecast updates

Economy
22 Forecast updates

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 2

Briefing sheet
Editor: Nathan Hayes
Forecast Closing Date: November 1, 2019

Political and economic outlook

The incumbent party, Frelimo, and its leader, Filipe Nyusi, won a landslide victory in the
October elections. The poll was marred by alleged fraud and violence, although the main
opposition party, Renamo, faces internal power disputes and was not a viable alternative.
In August Frelimo and Renamo signed a peace agreement, but a number of elements remain
unresolved, such as the terms of disarmament and decentralisation. This means that tensions
between the two parties could escalate.
In September most bondholders accepted the government's Eurobond restructuring offer. This
will offer partial relief to Mozambique in its ongoing debt crisis and allow ENH, the state
hydrocarbons company, to get capital for a liquefied natural gas (LNG) project.
After slowing to estimated growth of 1% in 2019 following two cyclones, we forecast that the
economy will grow by 4.8% in 2020 as recovery efforts drive activity and gas investment
inflows begin. From 2021 this investment will drive growth, to an average of 7.8% in 2021-24.
In 2020 large aid inflows will lead to a narrowing of the fiscal deficit. The deficit will then widen
in 2021, reflecting a gradual reduction in aid flows, before it contracts in 2022-24 as fiscal policy
is tightened.
The current-account deficit will widen in 2020 as imports increase following the cyclones, and
will continue to do so in 2021-23 in light of high spending on capital goods to support the
development of the gas industry, before narrowing in 2024 as gas exports increase.
Key indicators
2019a 2020b 2021b 2022b 2023b 2024b
Real GDP growth (%) 1.0 4.8 6.5 6.5 8.1 9.9
Consumer price inflation (av; %) 3.1 3.5 5.1 5.8 7.0 7.8
Government balance (% of GDP) -6.1 -3.6 -5.6 -4.1 -3.3 -1.6
Current-account balance (% of GDP) -30.4 -34.9 -43.0 -48.3 -48.4 -39.1
Money market rate (av; %) 15.5 15.0 14.5 14.0 15.0 15.5
Exchange rate MT:US$ (av) 62.17 63.13 66.25 68.33 67.62 64.38
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 3

Key changes since October 6th

We have revised down our export forecast for 2020 owing to a downward revision in our coal
production forecast for the year. Output will be below government targets owing to limited
investment in light of the weak global price outlook.
We have revised down our inflation forecast for 2020 to 3.5% from 4.4% previously, owing to
weak domestic demand as the agricultural sector remains weak, suppressing wages and
consumer sentiment.

The month ahead

November—TBC—Repayment of Eurobond begins: Following the acceptance of the Eurobond
restructuring by the majority of bondholders, repayment was originally expected to commence
from end-September, although this was delayed until after the elections. Bondholders will likely
push for this to begin soon after the poll.

Major risks to our forecast

Scenarios, Q3 2019 Probability Impact Intensity
Very
Drought or flooding triggers an economic downturn High 20
High
Companies struggle to raise financing High High 16
Contracts with the government are revised unilaterally High High 16
The government raises tax rates for "mega-projects" and big businesses Very High Moderate 15
An Islamist insurgency in the northern Cabo Delgado province of Very
Moderate 15
Mozambique derails large investments planned in the area High
Note: Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential
developments that might substantially change the business operating environment over the coming two
years. Risk intensity is a product of probability and impact, on a 25-point scale.
Source: The Economist Intelligence Unit.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 4

Outlook for 2020-24

Political stability
Political stability will decline following the presidential, legislative, and provincial elections held
on October 15th, which were marred by allegations of widespread fraud and violence. The
incumbent president, Filipe Nyusi, and the ruling Frente de Libertação de Moçambique (Frelimo)
won a landslide victory. However, the result was disputed by Resistência Nacional Moçambicana
(Renamo), an armed opposition party. Accordingly, potentially violent protests could break out
across districts that Renamo may feel that it should have won. Moreover, popular frustration over
state-level corruption, limited economic opportunity and poor fiscal management will remain,
heightening the risk of protests.
In August a long-awaited peace agreement between the two parties was signed. The main impetus
for this was the need to show that both parties are committed to peace and strengthening political
processes ahead of the election. However, the agreement existed largely on paper only, and The
Economist Intelligence Unit believes it has little viability; progress towards its two key pillars—
demobilisation of Renamo troops and their integration into security forces—has been slow and
haphazard. Renamo's military wing retains some authority in the party and remains unwilling to
disarm completely, owing to distrust of Frelimo (a position that will have been vindicated
following the election), as well as some internal discord within Renamo itself. Provincial
assemblies will not have tax-raising powers, and Frelimo hardliners have limited the power of
elected governors.
Renamo risks being destabilised by internal discord over challenges to the authority of the party's
president, Ossufo Momade. The group has been responsible for a number of attacks in recent
weeks, and violence could escalate in the coming months, particularly as the parties are less
concerned with building political capital after the election. However, we do not expect such
tensions to escalate into a protracted conflict (as in 2016), which would end in a stalemate, as has
repeatedly been the case in the past, with neither side making meaningful gains.
A growing jihadi insurgency by a militant Islamist group, Ansar al-Sunna (which may have been
joined by a jihadi group, Islamic State (IS), although such reports have not been independently
verified), threatens planned onshore gas facilities in the northern province of Cabo Delgado.
Attacks have been increasing in severity and frequency throughout 2019. The capacity of state
security services is strained and a number of countries (such as Russia and the US) have pushed
for greater international involvement in securing the area. A number of private security firms are
now operating in the region, raising questions over jurisdiction and accountability for the actions.
A significant outbreak of violence with Renamo would seriously limit the capacity of state
security services to fight the insurgency in the north, and potentially allow such insurgency to
spread.

Election watch
In the October elections Frelimo secured 73% of the presidential vote and 184 out of 250 seats in
parliament. Renamo won 22% of the presidential vote, and 60 seats in parliament. There were
reports of widespread ballot-box stuffing and little transparency in vote-counting in many
districts. During the election, a number of opposition politicians and civil society groups also
reported intimidation from state security services, alleging that the latter had attempted to stop
them from campaigning. Because of this, Renamo and other opposition groups have disputed the
outcome of the poll, but the result was upheld by the Constitutional Court. Eight members of the
National Election Commission (CNE)—made up of Frelimo and opposition party representatives—
voted against accepting the results, versus nine in favour. This highlights the weakness of state
institutions in Mozambique, and their vulnerability to party-takeover.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 5

International relations
Following the revelation in 2016 of secret, government-guaranteed debt that had been contracted
illegally by state-owned firms, relations with donors will remain tense. Having been largely cut-off
from capital markets since the emergence of this hidden debt, Mozambique will regain access
following the acceptance of the Eurobond restructuring by bondholders. Relations with some
creditors should consequently improve, although the syndicated loan will remain outstanding,
and keep arrears significant. With enormous LNG reserves, Mozambique is attracting significant
foreign direct investment (FDI), particularly from Russia, China and the US. Relations with some
bilateral creditors (notably Brazil, after Mozambique defaulted on state-backed loans) could come
under further strain if government arrears escalate. China is the largest lender to Mozambique and
is primarily focused on infrastructure development.
The government is looking to reduce reliance on its more traditional investors, Portugal and South
Africa. Nonetheless, South Africa remains an important partner: a number of bilateral deals exist
between the two countries, and there is still a strong trade relationship.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 6

Policy trends
Cyclones Idai and Kenneth caused widespread damage in 2019, and the recovery effort will
continue to dominate government policy in 2020. Under Article IV consultations, the IMF will
continue to provide advice to the authorities, but no financial assistance, although the Fund did
approve a US$118m loan in April 2019 under its rapid credit facility in the wake of the cyclones.
The IMF suspended Mozambique's stand-by credit facility in 2016, when previously undisclosed
loans pushed the country into debt distress. In the absence of a full IMF reform framework policy,
formation will remain haphazard. The depth of Mozambique's financing crisis will eventually force
the government to imple-ment some major reforms, such as the gradual withdrawal of subsidies
and the privatisation of state assets. These reforms will begin to materialise gradually post-
election, as the government will be less concerned with resistance to fiscal consolidation from
businesses and consumers. Moreover, the effects of the cyclones will delay reform, owing to
competing fiscal priorities. Structural reform to strengthen public financial manage-ment and
improve the business environment will remain slow because of operational inefficiencies in
Mozambique's public agencies. We do not expect the return of a full IMF programme without a
resolution of the outstanding debt issue.

Debt crisis: gradual progress

Mozambique officially defaulted in February 2017, when it missed a coupon payment on its sole
sovereign bond. Principal arrears have also accrued on sovereign-guaranteed (and illegally
contracted) commercial loans. The government is trying to restructure its external debt, but the
outcome of this is still uncertain.
In September 2019 the majority of bondholders accepted the Ministry of Finance's proposed
restructuring agreement on the country's US$727m Eurobond. Repayment was previously
expected to commence from the end of September, although this was delayed (in late September)
until after the October elections.
There are some differences between this proposal and a previous deal (proposed in November
2018). Crucially, the value recovery instrument clause (which linked repayments to expected future
gas revenue) has been removed. In addition, the bond will mature in 2031, rather than in 2033, and
principal repayments will start in 2028 rather than in 2029. It will pay a higher interest rate: 5% until
2023 and 9% thereafter, rather than 5.875% throughout. Mozambique has offered to pay up to a
total of US$8m to bondholders who accept the restructure willingly. The country will also pay
US$40m upfront to all bondholders, although part of that money will be used to pay the expenses
of the group that negotiated the restructure.
Two syndicated loans totalling US$1.1bn issued in 2012-15 to state-owned shell companies are
also in default, and resolution of this is more contentious. The prime minister, Carlos Agostinho
do Rosário, has stated that the government will only repay part of the loans, and the remainder
will be the responsibility of the shell companies. What proportion the government repays is
unclear, as a domestic debate rages over whether Mozambique should be liable for illegitimately
sanctioned loans.
We believe that it is likely that repayments of the Eurobond will be prioritised over repayments of
the (more legally dubious) syndicated loans. However, the legal precedent for such an
arrangement is uncertain. In addition, an actual or de facto withdrawal of the sovereign guarantees
on the syndicated loans would expose the individuals who contracted the debt to criminal
prosecution—a politically unpalatable outcome for the government. However, ongoing
investigations in the US, the UK and Switzerland into commercial banks' alleged wrongdoing
could force the situation into a legal battle, regardless of the government's efforts to avoid this.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 7

Fiscal policy
For the financing of emergency responses to major events (such as the cyclones), the government
has been largely reliant on the mobilisation of funds from external donors. International donors
pledged US$1.2bn in May—below the US$3.2bn that the UN Development Programme had
previously estimated would be required—and a number of governments have pledged bilateral
support. Nonetheless, government revenue in 2020 will be boosted by these inflows. In 2021
revenue will decline as these aid inflows wind down. We then expect a gradual increase in revenue
over 2022-24, owing to ongoing measures to strengthen revenue collection and increased
economic activity ahead of the LNG sector coming online.
From 2020, with the general election having passed, we expect the government to undertake some
spending cuts necessitated by financing constraints, although ongoing recovery from the
cyclones will limit the adjustment as the recovery continues. Subsidy programmes will also remain
substantial, but there will be more space to make cuts after the election. From 2021 the recovery
effort will be scaled back, and the further reduction of subsidies will lower expenditure, with
gradual spending cuts until 2024, although political resistance and cronyism will delay meaningful
civil service reform.
In all, we expect the fiscal deficit to narrow from an estimated 6.1% of GDP in 2019 to 3.6% of GDP
in 2020 as expenditure drops after the election, and stronger aid inflows offset higher spending on
reconstruction and recovery following the cyclones. The deficit will widen to 5.6% of GDP in 2021
as govern-ment revenue drops, before the government gradually undertakes fiscal consoli-dation
and reduces spending, with the deficit narrowing to 1.6% of GDP in 2024.

Monetary policy
The Banco de Moçambique (BDM, the central bank) will attempt to pursue the dual objectives of
maintaining price stability and supporting domestic demand, although poor co-ordination of fiscal
and monetary policy will continue to impede these efforts. In August the BDM cut the benchmark
interbank money market rate to 12.75%, from 13.25% (following a previous cut in June).
We forecast inflation of 3.5% in 2020 (from 3.1% in 2019), below the BDM's target range of 5-6%,
and so the BDM will have scope to institute a rate cut to support economic growth over the year.
Inflationary pressure will then tick steadily upwards. We expect further rate cuts in 2021 and 2022
as inflation remains within the target band, before steady rate hikes in 2023 and 2024 as inflation
rises above the target range.
Despite the BDM no longer propping up the metical via excessive intervention in the interbank
market (as has historically been the case), foreign-exchange reserves will decline in 2019 and reach
a low of 2.8 months of import cover in 2020, owing to the sustained current-account deficit, before
recovering in 2021-24 as exports pick up (even with a sharp rise in imports associated with the
LNG sector). We forecast that reserves will reach 3.5 months of import cover in 2024.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 8

International assumptions
2019 2020 2021 2022 2023 2024
Economic growth (%)
US GDP 2.2 1.6 1.8 2.0 1.8 2.2
OECD GDP 1.6 1.5 1.8 2.0 1.9 1.9
World GDP 2.3 2.5 2.8 2.9 2.9 2.8
World trade 1.5 2.4 3.6 3.8 3.9 3.8
Inflation indicators (% unless otherwise indicated)
US CPI 1.8 1.6 1.9 2.1 1.8 1.8
OECD CPI 2.0 1.9 2.0 2.1 2.0 2.0
Manufactures (measured in US$) 0.3 2.3 4.0 4.0 3.4 3.0
Oil (Brent; US$/b) 64.1 63.0 67.0 72.5 75.0 72.5
Non-oil commodities (measured in US$) -6.8 0.7 4.1 1.7 0.9 2.5
Food, feedstuffs & beverages (% change in US$ terms) -5.7 0.5 4.6 1.2 0.9 3.7
Aluminium (US$/tonne) 1,786.9 1,776.3 1,897.5 2,050.0 2,068.0 2,100.0
Coal (US$/tonne, Australia) 77.6 63.9 61.0 66.0 69.0 68.0
Financial variables
US$ 3-month commercial paper rate (av; %) 2.13 1.48 1.54 1.80 2.23 2.26
US$:€ (av) 1.12 1.12 1.17 1.22 1.24 1.24
¥:US$ 108.4 105.9 104.6 100.9 97.6 95.4

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 9

Economic growth
The cyclones in early 2019 caused damage to infrastructure, buildings, ports and agriculture,
causing growth to slow to just 1% that year driven largely by reconstruction efforts. The
economy will regain momentum in 2020, with growth of 4.8%, driven by ongoing reconstruction
efforts through increased construction activity and monetary easing. Coal output will recover in
2020, after dipping in 2019 owing to poor weather conditions. However, agriculture will remain
weak in 2020 as it recovers from the cyclones and drought, dragging on private consumption. The
economic recovery will continue in 2021-22, with real GDP growth accelerating to an average of
6.5%. Significant development work will begin from 2020. The gas industry will be a major driver of
economic expansion, with investment inflows increasing sharply from 2020, with ExxonMobil and
Anadarko (both US-based) planning to develop large onshore LNG export facilities, and Eni (Italy)
constructing a smaller offshore equivalent (the Coral gasfield).
In Area 1 of the Rovuma Basin, a consortium led by Anadarko originally required each partner to
raise its own financing. Anadarko confirmed its final investment decision (FID) in June 2019.
Empresa Nacional de Hidrocarbonetos (ENH), the Mozambican state-owned oil and gas company,
holds a 15% stake, and therefore needed to contribute US$2.3bn. However, in July it was
announced that ENH would delay raising this sum until Anadarko began implementing the
project. ENH delayed raising the bond to allow market conditions to improve; with the election
past and the Eurobond restructuring accepted, ENH will be able to raise funds at more favourable
rates. Despite this delay, we expect ENH to raise the necessary funds; the project is financially
sound, backed by credible international oil companies, and the process is transparent and
approved by Mozambique's parliament. In July ExxonMobil announced a delay to the FID on its
Area 4 project, originally slated for 2019, owing to political uncertainty, the growing Islamic
insurgency in Cabo Delgado province and concerns about rising capital investment costs. The
FID is now scheduled for early 2020, and we expect the project to go ahead.
Inward investment in auxiliary services (including financial and legal services and construction)
for the gas industry will increase, providing wider economic momentum and driving headline
growth. The start of production from the Coral gasfield from 2023 will boost real GDP growth in
that year to 8.1% and to 9.9% in 2024. LNG production will make a larger contribution to growth
once production begins in earnest, after the end of our forecast period.
Economic growth
% 2019a 2020b 2021b 2022b 2023b 2024b
GDP 1.0 4.8 6.5 6.5 8.1 9.9
Private consumption -2.4 -9.3 -11.6 -14.6 -21.3 -37.5
Government consumption 18.5 5.8 3.7 4.0 6.5 14.1
Gross fixed investment 8.2 55.0 45.0 35.0 30.0 28.0
Exports of goods & services -5.5 1.4 4.6 5.3 8.9 9.3
Imports of goods & services 3.5 10.4 12.1 12.8 13.2 13.8
Domestic demand 4.3 8.9 10.2 10.4 11.0 12.4
Agriculture -2.1 -1.0 7.0 3.4 3.4 4.0
Industry 4.0 6.9 7.1 7.3 16.0 18.0
Services 1.3 6.5 6.1 7.4 6.9 8.7
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

Inflation
Inflation will average 3.5% in 2020—from an estimated average of 3.1% in 2019—owing to a
weaker metical and lower interest rates following cuts, combined with modest upward price
pressure owing to increased economic activity. We expect average inflation to rise again in 2021,
to 5.1%, owing to further metical depreciation and a rate cut. Inflation will rise to 5.8% in 2022, 7%
in 2023 and 7.8% in 2024, driven by broader economic growth from the gas boom.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 10

Exchange rates
We expect the metical to decline to an average of MT63.1:US$1 in 2020, owing to the sustained
deficit on the current account. In 2021-22 we expect the depreciation to continue, as the current-
account deficit persists, reaching MT68.3:US$1 in 2022. However, the metical will then begin to
strengthen, reaching MT64.4:US$1 in 2024, in line with the start of gas production and a resulting
export boom.

External sector
It is estimated that there was a dip in export earnings in 2019 owing to lower global prices for coal
and aluminium, combined with disruptions to agriculture and coal production from the cyclones.
In 2020 we expect a modest recovery in export earnings as coal and aluminium production volumes
recover. In 2021 and 2022 export revenue will rise as production volumes increase further and
global prices start to recover. We then expect a sharp rise in exports in 2023 and 2024, as gas from
the Coral floating LNG project comes on stream. Imports will increase in 2020 as a result of inflows
of supplies and equipment as part of broader aid efforts. Growth in imports will continue from
2021-24, with heavy expenditure on capital goods to support the development of the gas industry.
The services deficit/GDP ratio will widen during the forecast period, in line with gas industry
imports of foreign services. The primary income deficit will widen in 2020-24 as payments on
Mozambique's Eurobond debt resume (as a new deal has been agreed with bondholders). Inflows
of aid in 2020 will contribute—together with existing donor programmes—to a sustained surplus
on the secondary income account, before narrowing over 2021-24.
The current-account deficit will widen to 34.9% of GDP in 2020 (from 30.4% in 2019), as imports
rise and exports fall. From 2021 the deficit will widen sharply—to 43.0% of GDP in 2021, reaching
48.4% of GDP in 2023—despite modest increases in exports, as capital goods imports associated
with the development of the gas industry begin to rise. In 2024 the current-account deficit will
narrow to 39.1% as gas exports increase. This will be financed by external borrowing and FDI
inflows.

Forecast summary
Forecast summary
(% unless otherwise indicated)
2019a 2020b 2021b 2022b 2023b 2024b
Real GDP growth 1.0 4.8 6.5 6.5 8.1 9.9
Consumer price inflation (av) 3.1 3.5 5.1 5.8 7.0 7.8
Lending interest rate (%) 20.0 19.0 18.0 17.5 18.0 19.0
Government balance (% of GDP) -6.1 -3.6 -5.6 -4.1 -3.3 -1.6
Exports of goods fob (US$ m) 4,668 4,981 5,559 6,630 8,871 11,272
Imports of goods fob (US$ m) -6,028 -6,867 -8,169 -9,934 -11,735 -12,405
Current-account balance (US$ bn) -4,631 -5,847 -8,105 -9,966 -11,579 -12,270
Current-account balance (% of GDP) -30.4 -34.9 -43.0 -48.3 -48.4 -39.1
External debt (year-end; US$ bn) 15.8 18.4 19.7 21.5 24.2 28.1
Exchange rate MT:US$ (av) 62.2 63.1 66.2 68.3 67.6 64.4
Exchange rate MT:¥100 (av) 57.4 59.6 63.3 67.8 69.3 67.5
Exchange rate MT:€ (av) 69.5 70.7 77.3 83.2 83.5 79.8
Exchange rate MT:SDR (av) 85.8 87.0 93.2 97.9 97.8 93.7
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 11

Data and charts

Annual data and forecast
2015a 2016a 2017a 2018a 2019b 2020c 2021c
GDP
Nominal GDP (US$ bn) 14.8 10.9 12.6 14.5 15.2 16.7 18.9
Nominal GDP (MT m) 591,678 687,117 804,463 872,167 946,183 1,057,006 1,249,521
Real GDP growth (%) 6.6 3.8 3.7 3.3 1.0 4.8 6.5
Expenditure on GDP (% real change)
Private consumption 4.9 2.8 3.5 3.8 -2.4 -9.3 -11.6
Government consumption 11.8 4.8 4.3 15.2 18.5 5.8 3.7
Gross fixed investment -22.8 -23.1 13.9 11.8 8.2 55.0 45.0
Exports of goods & services -1.2 9.4 25.4 4.5 -5.5 1.4 4.6
Imports of goods & services -6.7 3.7 -3.5 11.0 3.5 10.4 12.1
Origin of GDP (% real change)
Agriculture 3.1 2.6 4.3 3.5 -2.1 -1.0 7.0
Industry 12.4 5.4 7.0 4.5 4.0 6.9 7.1
Services 7.4 2.8 2.4 3.2 1.3 6.5 6.1
Population and income
Population (m) 27.0 27.8 28.6 29.5b 30.4 31.3 32.2
GDP per head (US$ at PPP) 1,233 1,256 1,289 1,325b 1,328 1,375 1,449
Fiscal indicators (% of GDP)
Central government budget revenue 29.6 24.2 26.6 25.7b 30.9 32.6 27.9
Central government budget expenditure 35.7 32.9 33.3 32.9b 37.0 36.3 33.4
Central government budget balance -6.1 -8.7 -6.7 -7.2b -6.1 -3.6 -5.6
Public debt 91.9b 133.6b 131.4b 80.1b 88.4 87.9 82.8
Prices and financial indicators
Exchange rate MT:US$ (end-period) 45.90 71.40 59.00 61.50 62.45 64.29 66.69
Exchange rate MT:€ (end­period) 49.97 75.26 70.76 70.42 69.01 73.29 80.02
Consumer prices (end-period; %) 10.6 21.2 5.6 3.5 4.8 4.6 5.2
Stock of money M1 (% change) 20.3 11.5 12.2b 5.5b 4.3 6.7 6.1
Stock of money M2 (% change) 26.1 10.1 4.6 3.5b 7.2 2.7 -2.4
Lending interest rate (av; %) 14.9 21.2 27.9 23.0b 20.0 19.0 18.0
Current account (US$ m)
Trade balance -4,163 -1,405 -498 -973 -1,360 -1,887 -2,610
Goods: exports fob 3,413 3,328 4,725 5,196 4,668 4,981 5,559
Goods: imports fob -7,577 -4,733 -5,223 -6,169 -6,028 -6,867 -8,169
Services balance -2,306 -2,701 -2,332 -3,570 -3,762 -4,347 -5,226
Primary income balance -300 -261 -394 -296 -413 -532 -681
Secondary income balance 802 521 638 338 903 919 412
Current-account balance -5,968 -3,846 -2,586 -4,501 -4,631 -5,847 -8,105
External debt (US$ m)
Debt stock 13,863b 13,851b 15,198b 15,218b 15,823 18,352 19,700
Debt service paid 641b 547b 1,364b 819b 991 1,026 1,388
Principal repayments 423b 384b 1,201b 615b 640 664 979
Interest 218b 163b 164b 204b 351 361 410
International reserves (US$ m)
Total international reserves 2,582 2,081 3,361 3,104 2,936 2,815 2,733
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Source: IMF, International Financial Statistics.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 12

Quarterly data
2017 2018 2019
4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr
Pricesa
Consumer prices (2000=100) 115.8 118.0 119.8 120.0 120.6 122.3 123.0 122.5
Consumer prices (% change, year on
7.0 3.3 3.3 4.9 4.2 3.6 2.7 2.1
year)
Financial indicators
Exchange rate MT:US$ (av) 60.60 60.80 60.00 59.30 61.10 62.36 63.30 61.50
Exchange rate MT:US$ (end-period) 59.00 61.60 59.30 60.60 61.50 63.90 62.90 61.50
M1 (end-period; MT m) n/a n/a n/a n/a n/a n/a n/a n/a
M1 (% change, year on year) n/a n/a n/a n/a n/a n/a n/a n/a
M2 (end-period; MT m) 385,742392,090389,227394,728417,572426,124434,758444,414
M2 (% change, year on year) 5.1 8.2 8.1 6.8 8.3 8.7 11.7 12.6
Foreign reserves (US$ m)
Reserves excl gold (end-period) 3,179 3,210 3,078 3,169 3,078 2,979 2,939 n/a
a Maputo.
Sources: IMF, International Financial Statistics; UN Food and Agriculture Organisation.

Monthly data
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Exchange rate MT:US$ (av)
2017 70.80 70.30 68.70 65.90 61.60 60.40 60.90 61.30 61.40 61.10 60.80 59.80
2018 59.20 61.10 62.00 60.60 60.00 59.40 58.80 58.70 58.70 60.50 61.00 61.50
2019 61.70 62.39 62.98 64.34 63.36 62.10 62.01 60.85 61.70 n/a n/a n/a
Exchange rate MT:US$ (end-period)
2017 70.60 69.80 67.80 64.70 59.90 60.50 61.20 61.40 61.30 60.70 60.60 59.00
2018 60.40 61.80 61.60 59.70 60.00 59.30 59.10 59.90 60.60 60.60 61.40 61.50
2019 62.00 62.70 63.90 64.40 62.20 62.10 61.40 61.30 61.90 n/a n/a n/a
M1 (% change, year on year)
2017 6.3 10.4 9.7 3.7 -1.8 -2.5 n/a n/a n/a n/a n/a n/a
2018 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
2019 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
M2 (% change, year on year)
2017 6.6 10.5 10.2 4.8 1.8 2.1 n/a n/a n/a n/a n/a n/a
2018 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
2019 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Deposit rate (av; %)
2017 14.6 15.7 16.7 16.5 17.1 17.6 17.2 17.8 18.7 17.8 17.5 18.1
2018 16.8 17.1 16.2 15.3 14.3 13.7 13.1 12.1 11.4 10.8 10.8 11.0
2019 10.8 10.4 9.5 8.9 9.0 8.9 9.1 8.8 n/a n/a n/a n/a
Lending rate (av; %)
2017 28.0 28.3 28.3 28.3 28.3 28.2 27.8 27.5 27.5 27.5 27.5 27.3
2018 27.3 25.8 25.5 24.5 23.5 22.5 22.5 21.8 21.8 20.4 20.2 20.2
2019 19.9 19.5 19.5 19.5 19.5 19.5 19.3 18.5 n/a n/a n/a n/a
Consumer prices (av; % change, year on year)
2017 20.6 20.9 21.6 21.3 20.4 18.1 16.2 14.1 10.8 8.4 7.2 5.6
2018 3.8 2.9 3.1 2.3 3.3 4.4 4.7 5.0 4.9 4.7 4.3 3.5
2019 3.9 3.7 3.4 3.3 2.4 2.3 2.2 2.0 2.0 n/a n/a n/a
Foreign-exchange reserves excl gold (US$ m)
2017 1,962 1,994 2,039 2,269 2,308 2,407 2,374 2,464 2,371 2,574 2,676 3,179
2018 3,237 3,109 3,210 3,201 3,171 3,078 3,060 3,010 3,169 3,090 3,101 3,078
2019 3,070 2,960 2,979 3,131 3,005 2,939 3,005 3,008 n/a n/a n/a n/a
Sources: IMF, International Financial Statistics; Haver Analytics.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 13

Annual trends charts

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 14

Monthly trends charts

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 15

Comparative economic indicators

Basic data
Land area
799,380 sq km

Population
29.6m (2017, World Bank)

Main towns
Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019
Mozambique 16

Population, 2013 (World Gazetteer calculations)

Maputo (capital): 2,006,494 (a)
Nampula: 596,679
Beira: 441,865
Chimoio: 279,677
Nacala: 234,553
Quelimane: 216,339
Tete: 187,807
Lichinga: 183,923
(a) Including Matola

Climate
Tropical and subtropical

Weather in Maputo (altitude 59 metres)

Hottest month, February, 22­31°C (average daily minimum and maximum); coldest month, July, 13­
24°C; driest months, July, August, 13 mm average rainfall; wettest month, January, 130 mm
average rainfall

Languages
Portuguese (official) and three main African language groups: Makua-Lomwe, Tsonga and Sena-
Nyanja

Measures
Metric system

Currency
Metical (MT); MT60.30:US$1 (2018 average)

Time
2 hours ahead of GMT

Public holidays
January 1st (New Year's Day), February 3rd (Heroes' Day), April 7th (Women's Day), May 1st
(Labour Day), June 25th (Independence Day), September 7th (Victory Day), September 25th
(Armed Forces Day), November 10th (Maputo City Day—Maputo only), December 25th
(Family Day)

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 17

Political structure
Official name
República de Moçambique

Form of state
Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019
Mozambique 18
Unitary republic

Legal system
Based on Portuguese-Roman law and the 1990 constitution, updated in 2004

National legislature
250­member Assembleia da República (parliament) elected by direct, universal suffrage every
five years

National elections
October 15th 2019 (legislative and presidential); next national elections are due in October 2024

Head of state
President, chosen by direct universal suffrage

National government
The president and his appointed prime minister and Council of Ministers; new cabinet appointed
in February 2015

Main political parties

Frente de Libertação de Moçambique (Frelimo) is the ruling party, with 144 parliamentary seats;
the main opposition party is Resistência Nacional Moçambicana (Renamo; 89 seats); the
Movimento Democrático de Moçambique (MDM; 17 seats), a Renamo breakaway party, was
formed in March 2009 and performed well in municipal polls in 2013 but failed to replace Renamo
as the main opposition party; another opposition party, Partido Humanitário de Moçambique
(Pahumo), was launched by former Renamo members in April 2010

Ministers in the presidency

President: Filipe Nyusi
Prime minister: Carlos Agostinho do Rosário

Key ministers
Agriculture & food security: José Pacheco
Culture & tourism: Silva Dunduro
Defence: Atanásio Ntumuke
Economy & finance: Adriano Maleiane
Education & human development: Conceita Sortane
Foreign affairs & co­operation: José Pacheco
Gender, children & social welfare: Cidália Oliveira
Health: Nazira Abdula
Industry & trade: Ragendra de Sousa
Interior: Jaime Monteiro
Justice & constitutional & religious affairs: Joaquim Veríssimo
Labour, employment & social security: Vitória Diogo
Land, environment & rural development: Celso Correia
Mineral resources & energy: Ernesto Tonela
Public works, housing & water resources: João Machatine
Science, technology & higher, technical & professional education: Jorge Nhambiu
Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019
Mozambique 19

Sea, inland waters & fisheries: Agostinho Mondlane

State administration & the public service: Carmelita Namashulua
Transport & communications: Carlos Mesquita
Veterans' affairs: Eusébio Gondiwa
Youth & sport: Nyeleti Mondlane

Central bank governor

Rogério Lucas Zandamela

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 20

Recent analysis
Generated on November 18th 2019

The following articles have been written in response to events occurring since our most recent forecast was
released, and indicate how we expect these events to affect our next forecast.

Politics
Forecast updates
Renamo rebellion takes hold
November 5, 2019: Political stability

Event
Armed attacks have escalated in central Mozambique, carried out by a breakaway faction of the
opposition Renamo party.

Analysis
Further armed attacks by Renamo's self-styled armed "junta", which has split away in rebellion
against the leadership of the party president, Ossufo Momade, signal that their insurgency is
gaining momentum. In the latest incident, on October 29th, an assault on a police station in the
Nhamatanda district, in central Mozambique, close to the road and rail line from the port of Beira
to Zimbabwe, resulted in the second police death in a week. The total number of fatalities since
the rebellion began in August is eight, with momentum gaining in recent weeks, including attacks
on the country's main north-south highway.
The rebels, led by a Renamo general, Mariano Nhongo, have gained the support of a majority of
the party's armed wing, who remain in the jungle and harbour various grievances, including
around terms and access to reintegration assistance for Renamo's fighters. They have also
rejected the peace agreement signed between the government and Mr Momade in August, which
they wish to see renegotiated. The rebellion also appears to have splintered armed Renamo
members, with some attacks now being attributed to unnamed gunmen not associated with Mr
Nhongo's junta.
The ruling party, Frelimo, has made no serious effort to hold talks with the rebels to address their
grievances. The government is in no mood to re­open the peace process or reintegration terms—
on which it has prevaricated for two years—and also sees some advantages to further weakening
Renamo and the leadership of Mr Momade. This strategy may prove self-limiting if the insurgency
takes hold further in central Mozambique, although we do not expect Frelimo to re-open peace
talks, as hardline elements within the party were unhappy with the terms of the first agreement,
and there is no mutual trust. Further risks to security are the deepening political and regional
division amid periodic violence from both sides, including government hardliners and the security
forces.

Impact on the forecast

We continue to believe that political stability will continue to slide since the election, with both
sides less concerned with building political capital. Renamo's breakaway group is gaining
momentum, as many in the party are unhappy with the results of the election and widespread
incidences of alleged fraud and violence surrounding the poll, combined with ongoing
dissatisfaction with the terms of the peace agreement and distrust of the ruling Frelimo.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 21

Islamist insurgency violence on the rise

November 7, 2019: Political stability

Event
In recent weeks, 10 Russian private military contractors have been killed by gunmen reportedly
linked to Islamic State (IS) in the northern Cabo Delgado province, as the group's violent
insurgency has gained momentum.

Analysis
The deaths of the mercenaries in two separate incidents (on October 31st and November 3rd)
indicate that the Islamist insurgency is accelerating and has not been materially deterred by the
intervention of the Russian private military contractor, the Wagner Group. The group has been
contracted by the Mozambique authorities to aid the security forces' struggling counter-
insurgency campaign. The Russian casualties—and more than 20 deaths among the Forças
Armadas por Defesa de Moçambique (FADM)—have taken place less than a month after the
arrival of Wagner and 200 Russian personnel and military equipment, including three attack
helicopters. The terms of Wagner's involvement, and how it will be compensated, have not been
disclosed. Russia's involvement in Mozambique is rising, and includes bilateral agreements on
official and commercial co-operation.
The incidents in which the Russians died follow a week of sharp escalation in violence related to
the insurgency; this includes two other violent attacks in which 14 civilians died and a number of
transport trucks were destroyed on November 1st and November 3rd in the north-eastern part of
the Cabo Delgado region in or near to Mocimboa da Praia district. Civilian displacement from the
area has surged as the local population has begun to flee to urban areas, where safety can be
more easily assured.
The insurgency has caused an estimated 300 civilian deaths in the two years since it began in
October 2017. Since then, the shadowy Islamist group has done little to communicate its views
and objectives to the public or the authorities.

Impact on the forecast

We expect violence in the region to continue, as neither the insurgents or government seem
willing to open a dialogue over ceasefire terms. Despite the rising level of violence in Cabo
Delgado, we do not believe that the insurgency poses a serious threat to the nascent onshore gas
industry, but the possibility of a growing regional threat from Islamist groups looks to be
mounting.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 22

Economy
Forecast updates
Evidence suggests Frelimo benefited from illicit bonds
November 6, 2019: Policy trends

Event
Court documents from a (US) trial have disclosed that the ruling Frente de Libertação de
Moçambique (Frelimo) party was a direct beneficiary of the country's illicit international bond
scandal, receiving US$10m in secret payments skimmed from US$850m in sovereign-backed
lending to a local state-owned company, Ematum.

Analysis
The New York trial of Jean Boustani, an executive of Privinvest, the Abu Dhabi shipbuilding
company that was at the centre of the illicit loans scandal, have confirmed that the Frelimo party
was a direct beneficiary of illicit payments. A forensic report commissioned by American
prosecutors has revealed that, in addition to Frelimo, a number of regime insiders and senior party
members were beneficiaries of extravagant payments and kickbacks, including Ndambi Guebuza,
the son of former president, Armando Guebuza; former director of the Serviço de Informações e
Segurança do Estado (SISE, the state intelligence service), Antonio do Rosario; and former
finance minister, Manuel Chang. A total of at least US$200m in corrupt payments was channelled
illicitly to the individuals, according to the documentation.
The illegal lending scandal led to a 2016 sovereign default and ongoing rupture in international
assistance to the country. The disclosures will do further reputational damage to the party and
add to the body of prima facie evidence that would support eventual criminal convictions. The
local judiciary is under the influence of the party and any decision on criminal prosecution will
need to be decided internally by Frelimo.

Impact on the forecast

It is commensurate with our forecast that the international investigation would shed more light on
Mozambique's long-running debt scandal. Access to new debt will remain limited as the debt
issue remains unresolved.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019

Mozambique 23

ENH to begin fundraising roadshow

November 7, 2019: Economic growth

Event
Mozambique's state oil company, Empresa Nacional de Hidrocarbonetos (ENH), is to begin its
international fundraising roadshow in mid-November to finance its stake in the Area 1 liquefied
natural gas (LNG) project.

Analysis
ENH holds a 15% stake in the Area 1 LNG project, and is seeking US$1.5bn to finance its share of
development costs. French oil major, Total, operates the project with a 26.5% stake, after buying
the Africa-based assets of Anadarko Petroleum Corporation in September 2019. In June Anadarko
announced the Final Investment Decision (FID) for the Area 1 project. In July ENH chief
executive, Omar Mitha, said that the company would delay efforts to raise capital for the project
until later in 2019, to allow market conditions to improve. Conditions for raising capital on the
markets have improved following Mozambique's October election and the restructuring of the
Eurobond debt.
The Area 1 project secures Mozambique's future as a globally significant energy supplier,
involving US$25bn in foreign direct investment (FDI), an amount in excess of total current GDP of
around US$14bn, and producing export revenue of around US$2bn annually. Gas production from
the project is expected to be 12.88m tonnes/year (t/y), although follow-on investment projects
could continue to expand production to as much as 50m t/y over several decades.

Impact on the forecast

The commencement of fundraising for ENH's share of the Area 1 LNG project is in line with our
view that significant commercial interest will ramp up in Mozambique. The gas industry should be
a major driver of growth and government revenue when output begins in the mid-2020s.

Country Report November 2019 www.eiu.com © Economist Intelligence Unit Limited 2019