The African Development Bank’s (AfDB) recent report, entitled “Country Focus Report 2024: Mozambique – Driving Mozambique’s Transformation”, emphasises the country’s continued dependence on megaprojects, despite the steady economic growth seen in recent years. The document highlights the urgent need for structural reforms to diversify the economy and promote more sustainable and inclusive development.
According to the report, despite significant economic growth, Mozambique’s dependence on megaprojects remains a considerable challenge. These projects, although they bring substantial investments, do not benefit the local population in a broad way. “Megaprojects have contributed significantly to economic growth, but their direct influence on the well-being of the population is limited,” reads the report.
The document reveals that Mozambique’s Tax Authority has managed to collect revenues equivalent to around 23 per cent of GDP in the last five years, a figure that is above the African average. However, most of this revenue comes from megaprojects. The AfDB emphasises the need to expand the tax base and combat tax evasion in order to strengthen public finances. “The mobilisation of domestic resources should be the priority in order to reduce dependence on megaprojects and promote more balanced growth,” it recommends.
The report also addresses the need to modernise the country’s financial sector. The revitalisation of the stock exchange and access to finance are identified as critical areas. “The financial sector needs to be more agile in intermediating resources, attracting remittances from the diaspora and supporting the stock exchange to mobilise local and external resources,” suggests the AfDB. In addition, building the capacity of financial institutions is considered crucial to meeting the current challenges.
Emigrants’ remittances have proven to be a vital source of funding, surpassing Foreign Direct Investment inflows in 2019. The ADB recommends creating incentives to channel these remittances into local development projects. “Directing remittances to local development initiatives can promote entrepreneurship and innovation, helping to diversify the economy,” the report states.
“Mobilising domestic resources should be the priority to reduce dependence on megaprojects and promote more balanced growth”
The development of a local entrepreneurial class is considered fundamental to Mozambique’s economic transformation. The report cites advances in the automotive sector and emphasises that “robust government support and policies that encourage local production and job creation are essential to ensure the sustainability of these efforts.”
The management of natural resources, especially liquefied natural gas, is also a crucial point addressed in the report. Transparency in the exploitation of these resources is vital to ensure that the benefits are widely distributed. “Proper management of natural resources can help mitigate existing social inequality,” emphasises the ADB.
The report also points to the challenge of public debt, which is close to 100 per cent of GDP. The institution defends the need for strict fiscal discipline and strategic debt renegotiations to guarantee financial sustainability. “Well-structuDe acordo com o BAD, estas recomendações fornecem um quadro abrangente das necessidades de Moçambique para reduzir a sua dependência de megaprojectos e promover um desenvolvimento económico mais equilibrado e sustentável.
Este relatório insere-se num conjunto mais amplo de 54 Relatórios de Foco por País publicados pelo Banco Africano de Desenvolvimento. Os documentos avaliam a experiência dos países no acesso ao financiamento para a transformação estrutural e sublinham as insuficiências do sistema financeiro global actual. As recomendações abrangem cinco áreas principais: alavancagem do financiamento do sector privado, aumento das finanças climáticas, reforma dos bancos multilaterais de desenvolvimento, revisão dos mecanismos de resolução de dívidas e melhoria da mobilização de recursos domésticos.
Estas propostas visam corrigir falhas estruturais e oferecer orientações práticas para um desenvolvimento mais equitativo e sustentável.red public-private partnerships could be a viable solution for financing infrastructure projects without further burdening the public debt,” the report suggests.
According to the AfDB, these recommendations provide a comprehensive picture of Mozambique’s needs to reduce its dependence on megaprojects and promote more balanced and sustainable economic development.
This report is part of a wider set of 54 Country Focus Reports published by the African Development Bank. The documents assess countries’ experience in accessing finance for structural transformation and highlight the shortcomings of the current global financial system.
The recommendations cover five main areas: leveraging private sector finance, increasing climate finance, reforming multilateral development banks, reviewing debt resolution mechanisms and improving domestic resource mobilisation. These proposals aim to correct structural flaws and offer practical guidelines for more equitable and sustainable development.
