The suspension of American aid exposes Mozambique to unexpected economic and diplomatic challenges. Without USAID funds, which supported key areas such as health, education and food security, the country needs to find urgent alternatives. The government faces the dilemma of adopting austerity measures or strengthening partnerships with new allies. The crisis imposes harsh lessons, but also the opportunity to rethink financial independence. Responding to this adversity could redefine the country’s economic trajectory in the coming years.
The recent decision by US President Donald Trump to suspend international aid for 90 days imposes serious difficulties on Mozambican, the main beneficiary of the US Agency for International Development (USAID) within the Community of Portuguese Speaking Countries (CPLP). The figures explain it: the country received more than 664 million dollars in 2023, mainly for health and food security. The abrupt interruption of this funding could jeopardise essential programmes, especially those to combat HIV/AIDS and humanitarian assistance, the consequences of which could be immediate and severe.
The impact of the suspension is already being felt by the Mozambican government. The Prime Minister, Maria Benvinda Levi, has acknowledged that the health sector will be the most affected, forcing the country to redirect internal resources to minimise the damage.
In order to better understand the scale of the damage and the solutions required, E&M spoke to consultants dedicated to economic co-operation. Paulo Reis and Francisca Neves are partners at EY Mozambique and have been auditing donor funds and international co-operation for several years (Paulo Reis has a career spanning more than 30 years and Francisca Neves also has extensive experience in the area of large donor projects in Mozambique). Both have built a team of 12 highly experienced professionals, accredited to audit funds from the US administration, including USAID.
Maria Benvinda Levi, Prime Minister of Mozambique
The size of the American intervention
The consultants begin by noting that there is a problem: consolidated statistics are lacking. Even so, they have no doubt that USAID and the US in general have a significant presence in Mozambique, especially in the public health, education and community development sectors.
‘We may be duplicating efforts unnecessarily in certain geographical areas or there may be situations in which there are several funds supporting the same causes, leaving out other important areas’
According to Paulo Reis, ‘it’s not clear what will happen with the suspension of US support because, for example, USAID is not the only agency channelling US government funds to Mozambique. There is also the Centre for Disease Control and Prevention (CDC) in the area of health and the Millennium Challenge Account in other areas linked to agriculture, which are not directly affected at the moment.’
The cut in USAID has a very significant impact on the beneficiary populations of projects and on partner organisations. Implementing agencies that use USAID funds, non-governmental organisations (NGOs), ministries and companies linked to these projects, including auditors and consultants, are being affected ‘and the impact is great.’ It remains to be fully measured. ‘Nobody can give figures on how much money will stop coming in with the suspension of US aid,’ said Paulo Reis.
The significance of the suspension of aid
There is no total, but there are partial figures. ‘Many projects’ supported by the US in Mozambique receive financial assistance of around “500 million dollars”. Investment that could disappear, ‘less foreign currency entering the country, fewer benefits for the population and, obviously, problems that remain unsolved’, emphasised Paulo Reis.
The volatility of US politics creates uncertainty as to whether the cuts will be permanent and how deep they will go. Both consultants warn that if this is a complete cutback in USAID’s planned funds, the impact will be more severe and difficult to resolve. The consequences could jeopardise economic growth projections. And even if it’s just a suspension and not a cancellation, ‘it could change the eligibility criteria for projects that aren’t cancelled,’ predicts Francisca Neves.
The global panorama of co-operation has changed
Paulo Reis emphasises that the break in American support may be a reflection of a paradigm shift that began some time ago. ‘Fifteen years ago, when I joined EY in Mozambique and started working in this area, the most important players in terms of international co-operation were the Nordic countries, mainly Sweden. In the meantime, for internal political or geopolitical reasons, they have left and bilateral cooperation has been losing relevance in favour of multilateral cooperation,’ he said. The World Bank, the African Development Bank (AfDB) and the United Nations system have gained relevance in Mozambique. ‘What has happened now with USAID, in which there has been a change in US policy,’ follows an “international trend” that had already been observed, emphasised Paulo Reis.
Musk and Trump are defining new rules in the global geopolitical landscape
What’s next? Rethink the system
Faced with the cuts and the new scenario, it’s time for the country to rethink how it manages funds from partners and donors. Because of the lack of consolidated statistics, it is estimated that several donors and NGOs are duplicating efforts in assisting projects of the same scope, in the same places, when they could diversify their aid. ‘There may be many funds supporting the same causes, leaving out other important areas without any assistance funds,’ explained Paulo Reis.
Because this is suspected to be happening in various sectors, Francisca Neves believes that there is a need for ‘an aggregator, responsible for managing all the projects that apply external support to the country. Both in terms of mapping and accounting for everything that is being done, clearly identifying the donors in each area and putting them all into a development plan.’
Focussed institutions need to be created
Francisca Neves suggests that the new government – given the weight that international co-operation has on public services and the economy – must create a government structure (a Ministry or public institute) to act as an interlocutor between the various funding and donor agencies and to promote more concerted action. It should also serve to gather statistical information that includes execution rates and evaluation by objectives, in line with the launch strategy.
‘There are three organisations funding anti-malaria programmes in the country. That’s great, nothing against it. But in the same province? Is it possible that there’s only malaria in that province? There are certainly many more problems, but there is a lack of dialogue,’ argued Paulo Reis.
Potential for sustainability still to be capitalised on
The consultants also consider it important to change another paradigm. Instead of the donor alone choosing projects or areas that he considers relevant, the recipient of the aid should prioritise them. How? Firstly, by creating more space to involve the private sector as an additional source of development support. For Paulo Reis, this is already a global trend. ‘I’ll give you the example of the support that the Carr Foundation has given to the recovery and development of Gorongosa National Park. Even though it is private, it includes other multilateral and bilateral donors,’ he explained.
One of the spheres of action for the private sector would be in the area of sustainability and, in this way, reaching out to communities. Paulo Reis explained that although Mozambique still doesn’t have much legislation in terms of sustainability, it is necessary to bring the corporate sector (multinationals or national companies) into issues in this area, with an impact on the communities they involve. This is a global trend, like a train in motion that Mozambique has to catch.
In this respect, from the point of view of opportunities, Mozambique is in a position to stand out. Francisca Neves recalls that the country has gas projects, which are relevant in the context of the energy transition, not to mention all the potential for developing renewable energies and capitalising on the carbon credit market, which has become an important instrument for raising finance in recent years. ‘This is where we have to go, without waiting for bilateral partners (World Bank, IMF, USAID, Swedish Cooperation, etc.) to be responsible for change. The entry of the private sector, in a structured way, will be the future,’ the consultants suggested, pointing to the EU as one of the successful models.
Text: Celso Chambisso – Photo: Mariano Silva & Istockphoto
