In this centenary edition of E&M, African Development Bank representative Rômulo Corrêa looks ahead to the next decade and anticipates a more industrialised, productive, and integrated Mozambique — provided the country can translate potential into sustainable and inclusive development.
Over the previous 99 editions, E&M has tracked the transformations, challenges, and choices shaping the trajectory of Mozambique’s economy. For this special edition, the publication invited one of the country’s key development partners, the African Development Bank (AfDB). The Bank’s investment portfolio in Mozambique is concentrated in energy (56%), transport (24%), and agriculture (13%), alongside water and economic governance. Geographically, 63% of the portfolio is directed at the northern region.
“The banking sector is solid, but credit to the private sector remains below 20% of GDP. This means the country needs to create conditions for financial intermediation to channel existing liquidity into investment, entrepreneurship, and job creation.”
Yet Mozambique remains at the lower end of global development rankings. Can the AfDB’s strategic document for 2023–2028, developed jointly with the government, make a difference? Rômulo Corrêa, the AfDB’s resident representative in Mozambique, addresses these questions.
How do you assess the outlook for Mozambique’s economy?
The AfDB’s outlook for Mozambique’s economy is positive. After estimated growth of 0.2% in 2025, we project it will reach 2.1% in 2026 and 3.5% in 2027, driven by the extractive sector and private investment. The country has some of the most promising conditions for accelerating economic growth, notably the combination of world-class natural resources with a new wave of gas megaprojects, a strategic location, and significant opportunities for productive diversification. The key question is this: how can Mozambique leverage its status as a resource-rich country to build an inclusive society?
Growth must strengthen the national economy so that welfare gains and poverty reduction no longer depend on such high growth rates. A gas platform, for instance, is capable on its own of generating double-digit production increases and establishing solid macroeconomic and fiscal anchors almost overnight. However, its footprint in the local economy remains limited, given its reliance on imported machinery and a small skilled labour force.
The evidence of recent decades illustrates this risk: during a period of strong economic growth, the manufacturing sector’s share of GDP fell from 18.4% in 2001 to just 9.2% in 2021. Growth was concentrated in capital-intensive sectors with few linkages to the broader economy — and in particular to the sectors with the greatest employment potential. Mozambique was extracting value without creating it locally, and that distinction is fundamental.
So, what conditions are needed for Mozambique to convert that potential into development?
To promote inclusive growth and structural transformation, three well-known areas need to be refined. Institutions must work effectively for individuals and businesses, with predictable rules and less bureaucracy. Human capital must be prepared by investing in young people, so that Mozambique can participate in higher-value global chains. And macrofiscal fundamentals must remain solid — that is, public expenditure must be reoriented towards investments with high economic and social returns while keeping public debt on a sustainable trajectory.
Mozambique already knows how to create the right instruments for this purpose. A good example is the Sovereign Wealth Fund, operational since 2025, which channels 40% of oil and gas tax revenues into savings for future generations and serves as a buffer against commodity price volatility. The remaining 60% is directed to the State Budget — and it is precisely here that the three priorities mentioned above come into play. The 40% protects the country in difficult years and the 60% serves it in years of prosperity. That is why I remain optimistic.
What does the AfDB’s new financial architecture mean in practice?
The New African Financial Architecture for Development (NAFAD) starts from the premise that Africa’s development cannot continue to depend predominantly on external flows. Development finance must be used to de-risk private investment, attract commercial capital, and strengthen productive sectors capable of generating jobs, exports, and domestic value added at scale. To that end, we believe development finance must increasingly rest on more robust domestic resource mobilisation, deeper capital markets, pension funds, sovereign wealth funds, diaspora resources, and African banking and financial institutions.
This vision shapes our work in Mozambique. Today, non-sovereign operations represent more than US$700 million of our portfolio in the country — nearly half of our total portfolio. Our objective is to use each dollar of concessional financing to mobilise multiples of private investment, whether through infrastructure that enables projects — such as the Namaacha wind farm or the Agro-processing Zone in Cuamba — or through our participation in structuring projects in the gas sector, which help reduce risk, reinforce market confidence, and attract new investors to the Mozambican economy.
But access to external financing has become more complex due to fiscal constraints, rising capital costs, and multiple global crises.
Mozambique faces a combination of macrofiscal and governance vulnerabilities that continue to limit capital mobilisation, both in terms of public resources and attracting investment. Rising debt service costs, limited fiscal space, and growing social spending needs create additional pressure. The banking sector is solid, but credit to the private sector remains below 20% of GDP. This means the country needs to create conditions for financial intermediation to channel existing liquidity into investment, entrepreneurship, and job creation. The extractive sector can also support growth and generate revenues, but limited diversification, low agricultural productivity, and weak industrial linkages continue to hold back structural transformation.
Our 2024 ‘Focus on Mozambique’ report estimated that the country needs approximately US$11 billion per year to meet the Sustainable Development Goals and the Agenda 2063 targets, of which US$6.4 billion is needed for infrastructure alone. Agriculture receives only 3% to 5% of public expenditure, against a target of 10%, creating an annual deficit of US$300 million to US$500 million in irrigation, inputs, and value chains.
“Development finance must rest on more robust domestic resource mobilisation, deeper capital markets, pension funds, sovereign wealth funds, diaspora resources, and African institutions.”
So, concrete solutions are needed?
Solutions involve consolidating the macrofiscal framework, tackling illicit capital flows and tax evasion, formalising businesses, expanding alternative development finance sources including pension and insurance funds, adopting a clear natural capital management strategy, and investing more in technical and professional skills.
With US$1.6 billion in approved operations, the AfDB will continue to provide long-term financing at below-market rates, alongside capacity building and technical assistance. Given Mozambique’s challenges, the Bank will also continue to mobilise resources to reduce vulnerability to shocks and strengthen resilience through concessional windows such as the Transition Support Facility, which accounts for approximately 12% of public sector financing within the active portfolio.
Mozambique benefits from the support of institutions such as the World Bank, IMF, European Union, and bilateral partners. How does the AfDB position itself within this framework, and how does it ensure complementarity among different development financiers?
We operate where our mandate and expertise give us a clear comparative advantage. The Bank recently assumed the co-chairmanship of the Development Cooperation Platform (DCP), alongside the role it already plays as co-chair of the Public Finance Management group and the working group on northern Mozambique. By leading these platforms, the ambition is to support Mozambique in moving towards coherent dialogue with partners rather than multiple separate conversations. By participating proactively in these and other platforms, the AfDB works to ensure that the implementation of its strategy remains aligned with government priorities and complementary to other partners.
But many public investments struggle once external support ends. How can AfDB-financed projects continue to generate impact after financing concludes?
Sustainability cannot be an afterthought — it must be designed from the outset. This begins with working within existing government structures, strengthening human, technical, and institutional capacities. We believe in technical assistance as a vector for improving public services.
Second, projects need their own economic logic to continue generating revenues wherever possible, linked to a private sector capable of keeping them operational rather than depending on public budgets already under considerable pressure.
Third, the sequencing of support must be planned so that the next phase is already positioned before the previous one concludes. For example, the AfDB has been supporting the Nacala Corridor in phases since 2009, with road works crossing Mozambique, Malawi, and Zambia. Each phase has mobilised additional partners and co-financiers rather than starting from scratch. The goal is to combine asset financing with the national capacity to manage those assets.
In which areas does the AfDB identify the greatest needs?
Energy, transport, and logistics corridors — sectors that together account for the largest share of the AfDB’s portfolio in Mozambique. We believe that building an integrated, reliable, and accessible electricity system for households, businesses, and southern Africa is strategic for reducing poverty, fostering new industries, and generating robust public revenues to finance other development needs. This vision explains why more than 50% of the Bank’s financing in the country is concentrated in the sector. The Temane–Maputo and Songo–Matambo transmission lines reinforce the national backbone and regional interconnections. The National Dispatch Centre will enable better integration of renewables; the Namaacha Wind Farm, the country’s first at commercial scale, marks a step in the energy transition; and the Energy for All programme is expanding access through on-grid and off-grid solutions. Looking ahead, the Bank is supporting the preparation of the Mphanda Nkuwa transmission infrastructure, which is expected to boost regional energy trade. To amplify this potential, we believe in strengthening the investment environment for greater participation by independent power producers, and in clearly articulating gas and electricity master plans within a single least-cost energy planning framework to coordinate and sequence public and private investments.
Beyond energy, you identified transport corridors as strategic. How can this infrastructure be transformed into genuine economic corridors?
On transport, the challenge is to deliver climate-resilient infrastructure linking production zones to markets, attracting private investment, creating jobs, and improving access to public services. To that end, the Bank has invested more than US$800 million in the sector, including the rehabilitation of approximately 1,050 kilometres of strategic roads, support for the Nacala railway system, and investments in the Maputo Corridor. The economic and social return is maximised when this infrastructure reduces logistics costs, facilitates trade, and connects producers — especially farmers — to value chains. On the Nacala Corridor, for example, travel time was reduced by more than 60%, from 12 hours to under 5 hours, benefiting more than 4 million people.
To amplify the economic and social return on each dollar invested, the Bank combines physical investments with social infrastructure and climate and digital resilience. In Cabo Delgado, for example, 8% of the programme’s total investment — approximately US$14 million — is dedicated to social inclusion, financing more than ten schools, clinics, water systems, and markets, with an expected benefit for more than 500,000 people. On climate and digital resilience, the Bank has supported the use of drones for disaster monitoring and response, strengthening the country’s capacity to anticipate and respond to climate shocks. It is this combination of physical infrastructure, social inclusion, and resilience that ensures investment translates into lasting gains for communities, rather than isolated assets.
The coming decades will be decisive in determining whether Mozambique can transform potential into development. What reforms do you consider indispensable to accelerate the country’s economic transformation?
In ten years, success should be reflected in a manufacturing industry and a diversified private sector commanding a substantial share of GDP. Agriculture should evolve into a modern, productive, and market-oriented sector, integrated into competitive regional value chains and contributing meaningfully to exports, employment, and food security. The Maputo, Beira, and Nacala corridors should function as engines of trade and industrialisation for Mozambique and the SADC region. The private sector, anchored in SMEs, should absorb the hundreds of thousands of young Mozambicans entering the labour market every year. The country should also have a macrofiscal framework resilient to global uncertainties, capable of financing a growing share of its development from domestic and continental sources at more competitive costs.
But getting there starts with the essentials: an investment environment that works for businesses as a rule, reducing the friction that keeps firms informal and small. Young Mozambicans must have the technical, digital, and entrepreneurial skills demanded by the economy Mozambique is building.
Fiscal discipline must be maintained long enough to be credible — closing the fiscal deficit, placing debt on a sustainable trajectory, and directing natural resource revenues towards what generates cumulative effects: productivity, jobs, and institutions.
Source: Diário Económico
Original article: https://www.diarioeconomico.co.mz/?p=543448
