Mozambique

Located in Southern Africa, Mozambique borders six countries and has a 2,700 km-long coastline on the Indian Ocean, which strategically positions it to serve landlocked neighbors. It is endowed with vast natural assets, including offshore gas reserves, mineral deposits, arable land, hydropower potential, and rich biodiversity. Despite these advantages, many of the country’s 33 million people, two thirds of whom live in rural areas, lack access to basic services and meaningful economic opportunities.

Growth remains constrained by a combination of immediate economic pressures and longstanding structural challenges. These include mounting macro-fiscal imbalances, such as liquidity constraints and foreign exchange shortages, weak governance, inadequate infrastructure, low levels of human capital and skills, a constrained business environment, vulnerability to external shocks, deep-seated institutional fragility and conflict and pronounced spatial disparities.

The country has gone through an eight-year conflict in the gas-rich north that remains volatile, with ongoing low-level attacks by the Islamic State of Mozambique (ISM) across the province of Cabo Delgado and into the neighboring provinces of Niassa and Nampula. Mozambique is also facing broader social discontent as illustrated by the disputed 2024 general elections that triggered widespread violence.

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Economic activity recovered modestly in 2026 following a 0.2% contraction in 2025. Real GDP grew by 1.7% year-on-year in Q2, supported by agriculture, services, and a recovery in extractive industries. Inflation rose to 7.5% in July, while the Bank of Mozambique maintained its policy rate at 9.25% (since January 2026). Fiscal pressures eased somewhat, with stronger VAT collections and lower expenditure helping contain the deficit. However, continued arrears accumulation and weak external financing constrained fiscal space and increased reliance on domestic borrowing.

GDP growth is projected to recover gradually, reaching 0.6 % in 2026 and 2.5 % by 2028, supported by a recovery in agriculture and services and the resumption of liquified natural gas (LNG) construction. Inflation is expected to rise to 7.5 % in 2026, driven by flood-related food supply disruptions and higher fuel and shipping costs linked to the Middle East conflict. The fiscal deficit is projected to widen to 5.2 % of GDP in 2026, reflecting modest revenue recovery and higher spending driven by rising wages and renewed capital investment. Medium-term fiscal consolidation hinges on containing the wage bill, amid risks from global and climate shocks, LNG project delays, security issues in the North, and mounting fiscal and foreign-exchange pressures.

Poverty has increased sharply, with the national poverty rate rising from 48.4 % in 2014/15 to 62.9 % in 2022, pushing an additional 7 million people into poverty. This is attributed to the hidden debt crisis, COVID-19, and natural disasters. Poverty is concentrated in Nampula and Zambezia, home to 46 % of the poor, while persistently low agricultural productivity continues to hinder poverty reduction.

Mozambique Economic Updates

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Building a more resilient and inclusive economic model is critical to create jobs, reduce poverty and inequality, and withstand future shocks. Priorities include containing the wage bill, improving spending efficiency and revenue mobilization, strengthening debt management, improving the business environment, and ensuring effective LNG revenue management. Investments in education, health, infrastructure, access to finance, regulatory reforms, and reduced regional disparities are key to driving job creation, structural transformation, and resilience.

Since 2015, Mozambique has faced persistent shocks, including the hidden debt crisis, cyclones and floods, COVID-19, an insurgency in the North, and recent post-electoral unrest. Growth remains fragile and dependent on extractives, while real GNI per capita fell by 0.1% between 2016 and 2024.

Agriculture employs over 70% of the population but suffers from low productivity, climate vulnerability, and weak investment. Rural poverty is entrenched, and informality dominates, accounting for over 80% of employment.

Weak infrastructure, low human capital, and business environment constraints limit productivity, private investment and structural change. Fiscal pressures have intensified, with public debt assessed as ‘in distress’ and ‘unsustainable’. In 2025, wages and interest absorbed 88% of tax revenue, severely limiting space for infrastructure and social spending.

Human capital constraints–including a low Human Capital Index of 0.36–further weigh on inclusion and productivity. Skills shortages, limited labor-market access, and persistent gender inequalities (including high fertility, adolescent pregnancy, maternal and child mortality, and gender-based violence) undermine economic potential. High underemployment and inequality constrain inclusion, while limited access to basic education, health services, and social safety nets deepens spatial inequalities and fragility.

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The new WBG Country Partnership Framework (CPF) for Mozambique covers FY26–31 and aims to unlock economic opportunities and expand access to quality jobs for Mozambique’s growing youth population, leveraging the country’s natural resources and strategic Indian Ocean location to catalyze growth and regional integration. Aligned with national priorities, the CPF supports efforts to accelerate economic transformation, strengthen institutions, and broaden opportunities, especially for women and young people. Central to the strategy is revitalizing key economic corridors, Nacala, Beira, Maputo, and the emerging North–South corridor, connecting people, markets, and industries across Mozambique and Southern Africa.

Under the CPF,Mozambique secured eligibility for stepped-up IDA financing throughthe Prevention and Resilience Allocation to address conflict risks. This includes a trajectory‑shifting compact endorsed by the Council of Ministers, structured around four goals: (i) strengthening institutions and securing macroeconomic and social stability; (ii) ensuring inclusive service delivery at local levels to address regional imbalances; (iii) promoting transparency and inclusion in the management of extractives and natural resources; (iv) supporting peace and security.

The CPF is structured around four transformative outcomes:

• Improved Macro-Fiscal Stability
  Supporting reforms to reduce debt risks, enhance public financial management, and improve the business environment.
• A Better Skilled Workforce
  Investing in foundational learning, vocational training, and health to boost employability and productivity for youth and women.
• Improved Energy Access and Powered Economic Corridors
  Expanding access to electricity and building transmission infrastructure to power domestic and regional growth.
• Increased Private-Sector-Led Jobs in Agribusiness and Tourism
  Mobilizing private capital and strengthening value chains to create over 800,000 new or better jobs.

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Support for youth employment and entrepreneurship has reached 20,000 young people, financed 500 youth‑led SMEs and 3,000 micro‑entrepreneurs, and created 6,000 jobs. Investments in trade, connectivity, and private sector development have created or improved 14,000 jobs, support more than 7,000 MSMEs, and mobilize $5.5 million in private investment.

Energy investments have connected 4 million people to electricity, with ongoing operations expected to reach 5 million more through on and off-grid solutions, while major transmission projects are strengthening regional energy integration.

In education, World Bank Group support has improved learning for 8 million students, expanded higher education opportunities to 54,600 students, developed 80+ TVET qualifications, certified 3,136 trainers, and extended digital access to 180,000 users. Support for adolescent girls has helped 700,000 stay in school and reduced dropout rates by 29%.

Access to water and sanitation has expanded. Clean water now reaches 120,000 additional people, improved sanitation benefits 100,000 residents and 145,000 students, and safe water services expand to 500,000 people in Nampula/Zambezi. Tariff reforms generated $5.3 million for municipal services.

Health investments expanded access for 1,2 million people in the North, through 80 facilities and 1,000 community health workers, while community-based programs reach 2.5 million households. Investments in disease surveillance, laboratories, and digital systems are enhancing preparedness for future health emergencies.

In rural areas, support to 221,000 households has increased incomes by 85%, diversified livelihood by 65%, raised productivity in value chains by 50%, expanded forestry planting across 2,540 hectares and conserved 148,000 hectares of forest.

Access to finance has expanded through Mozambique's first universal public credit guarantee scheme, mobilizing $9 million in private capital and supporting 600 MSMEs within its first ten months of operation.

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