Economy of Mozambique

By | April 29, 2022

With the help of foreign specialists, a program is being implemented to revive cotton plantations in the north of the country. Under their leadership, farmers grow cotton on rented plots and hand over the harvest to the state company. Sugarcane is one of the few cash crops that has exceeded pre-war levels. Another new and rapidly developing branch of agriculture was the cultivation of cashew nuts. A program to expand their plantings is funded by France, and a $20 million loan has been taken to build nut peeling plants. In 2000, cashew plantations were badly damaged during a flood. Nevertheless, the government intends to bring the cashew harvest to 100 thousand tons by the end of the decade. Timber harvesting is carried out mainly along the railway from Beira to Zimbabwe and in the province of Zambezia.

According to businesscarriers, the timber is exported to South Africa. The volume of production of the forest industry remained in the 1990s. at the same level (18-20 million m3), but South African investments in the amount of 86.5 million US dollars should lead to an increase in timber production in the beginning. 2000s Fishing began to develop only in the 1990s. The main object of fishing is not fish, but shrimp. In 2000 they accounted for 40% of exports. Spain and Japan provided loans for the construction of a fishing complex in Cabo Delgado and for the modernization of the fishing port in Maputo. In 2000, approx. 40 thousand tons of seafood. The backbone of the country’s energy system is the 2,075 MW Cabora Bassa hydroelectric power station, which provides energy not only to Mozambique, but also to South Africa and Zimbabwe. Now 1,400 km of high-voltage lines destroyed during the civil war have been restored. Projects for the construction of power transmission lines in Zimbabwe (350 km), Malawi and Swaziland have been developed and started to be implemented. Less powerful hydroelectric power stations were built in Chicamba Real and in Mausi on the river. Roar, in Koruman, on the tributaries of the Limpopo. Together with South Africa and Swaziland, Mozambique is participating in the construction of three hydroelectric power stations on the river. Kumati, electricity and irrigation water will be used to develop the border regions of the three countries. A plan has been developed for the construction by 2007 of another hydroelectric power station on the river. Zambezi, equal or even superior in power (2000-2500 MW) to the hydroelectric power station in Cabora Bassa. The estimated cost of the HPP itself is $1.5 billion, and another $0.5 billion will be required for the construction of transmission lines in South Africa. Electricity production in 2000 7017 billion kWh. The railways were built not for the needs of Mozambique, but for the transportation of goods between its ports and the cities of South Africa, Rhodesia (Zimbabwe), Malawi. All 7 railways cross the country from west to east and are not interconnected. The length of railways is 3131 km. Many sections of roads after the war have not yet been restored. The volume of transportation is 142 million passenger-km and 774 million tkm of cargo (2001). The length of roads is 30.4 thousand km, of which 5.7 thousand km are paved (1998). Roads also run from west to east and have not been restored everywhere. The government considers the construction of a highway linking the north and south of the country to be the most important transport problem, which is necessary for creating a single internal market and developing the economically backward northern provinces. Two oil pipelines have been laid from Beira to Zimbabwe, one for pumping crude oil (306 km) and the other for petroleum products (289 km). Through the main ports – Maputo, Beira, Nacala and Quelimane – in 2000 passed approx. 10 million tons of cargo (estimate). Ports are being upgraded. A plan has been drawn up to build a new deep water port at Ponta Dobela, 70 km south of Maputo. The cost of the project is 515 million US dollars, the annual throughput of the port is 30 million tons of cargo. 60% of the shares will be owned by a foreign consortium, and 40% by the government of Mozambique. In 2000, the government transferred the management of the ports of Nacala and Maputo to foreign companies. In 2003, the privatization of the port of Beira was planned. The merchant fleet of Mozambique – 131 ships with a total displacement of 38 thousand tons (2001). Cargo turnover of ports is 7.3 million tons (2001). There are 22 airports, of which three are international. In 2000, 180 thousand passengers and 35 million tkm of cargo were transported (estimate). In 2001 there were 89.4 thousand landlines and 170 thousand mobile phones. There were 41 radio stations and 1 TV station. Number of TVs – 67,600 (2000). 15 thousand people used the Internet. people (2001). As a result of privatization, all retail trade and almost all wholesale trade were transferred to the private sector. Tourism began to revive after 1992 and is developing rapidly. More than 600 thousand tourists visit the country annually, mainly from South Africa. The importance attached to the development of tourism is evidenced by the creation in 1999 of the Ministry of Tourism. With funds provided by the EU, it developed the Mozambique Tourism Master Plan, which includes 138 tourism projects worth $900 million. The government’s economic policy is aimed at restoring war-ravaged infrastructure, commercial agriculture, and creating new industries. To do this, it is carrying out structural reforms of the economy, which have already borne fruit. These are high GDP growth rates, a decrease in inflation from a three-digit figure to 4, 8% in 1999 (because of the flood in 2000 it rose to 12%), gradual improvement in the trade balance, a firm metical exchange rate, etc. The government effectively agreed to IMF control over economic policy. The IMF’s stringent demands included cuts in government spending, increased taxes, privatization of unprofitable enterprises, curbing the growth of wages tied to increasing labor productivity, and limiting government lending to the manufacturing sector. When, for example, it turned out that business lending exceeded the limit set by the IMF, it delayed the transfer of foreign exchange tranches to Mozambique until the situation was corrected. Financial recovery and economic recovery would not have been possible without external assistance, and the assistance received by Mozambique in the 1990s is one of the most significant in sub-Saharan Africa. The four main donors – the World Bank, the USA, Great Britain and Germany provided in the form of loans and grants from 700 million to 1.5 billion US dollars a year in 1994-2001, while Mozambique’s debts are regularly written off. In June 1999, the IMF wrote off 3.7 billion US dollars (2/3 of Mozambique’s external debt), and in April 2000 another 600 million. $.65 billion (60% of debt). The social policy aimed at supporting workers is manifested in the cities (wage indexation, free medical care) and to a lesser extent in rural areas, where subsistence peasants do not receive any assistance from the state, although it should be noted the creation of jobs in the revived plantations. The financial system is monitored by the state-owned Bank of Mozambique. It issues money, issues licenses to private banks, and determines the overall financial policy (metical exchange rate, discount rate). Commercial operations are carried out by 12 banks (8 state and 4 foreign). The budget is chronically deficient and largely covered by external borrowing. In 2001, revenues – 393.1 million US dollars, expenses – 1025 million, including the capital investment budget (479.4 million). Taxes and duties provide more than 90% of income. In 2001, external debt was estimated at $1 billion. Foreign exchange reserves amounted to USD 715.6 million. The standard of living of the population is very low. 70% of the population (2001) lives below the poverty line, and hundreds of thousands flee to neighboring South Africa, where they become illegal immigrants. The increase in the cost of living index in Maputo before the 2000 flood was very moderate (in 1997-99 it increased by 3%), but in the next two years it probably increased by at least 10% per year. Deposits in banks increased in 1997-99 by 20% per year, but in 2000-01 they remained (adjusted for inflation) at the same level at best. In foreign trade, Mozambique has a significant deficit. In 2001, exports amounted to 746 million US dollars, and imports – 1254 million. The main import items are machinery and equipment, manufactured goods, food, textiles. The main export items are shrimp, cashew nuts, sugarcane, and electricity. The main trading partners are the EU, South Africa, India, Zimbabwe. The balance of payments is chronically deficient ($418.7 million in 2001), despite significant transfers and capital investments from abroad.

Economy of Mozambique