Mozambique finds itself at a “critical crossroads,” needing simultaneously to ease fiscal pressures, accelerate economic growth, and strengthen social cohesion. The warning was issued by Hugo Costa, Head of Financial Markets and Treasury at Banco Comercial e de Investimentos (BCI), on Wednesday (15), during a presentation on the “Country’s Economic Outlook for 2026.”
According to Costa, “these three dimensions are not independent of one another and must advance in parallel to ensure the expected economic and social development.”
In painting a picture of the country, Hugo Costa highlighted that Mozambique is a relatively small economy compared to other countries in the region, with a Gross Domestic Product (GDP) in the range of 22 to 23 billion dollars, which has faced various shocks in recent years, ranging from the COVID-19 pandemic to the insurgency in the north, as well as extreme weather events and volatility in energy prices, noting that “these variables have exerted strong pressure on public spending and constrained economic recovery.”
Despite the challenges, the official listed several factors working in the country’s favor, including the economic growth recorded over the past few decades, its natural resources, and the transformative potential of the gas projects in the Rovuma Basin. “Each of these projects represents a significant boost to GDP,” he emphasized, highlighting the impact they could have on the economy.
Other positive factors include the country’s geostrategic position as a regional logistics corridor, its agricultural and energy potential, as well as a banking system considered “stable, well-capitalized, and liquid,” capable of supporting a potential economic acceleration. Inflation, for its part, “is currently under control, as a result of an interventionist monetary policy by the central bank (BdM),” he noted.
“This performance contrasts with the historical average growth of around 8% to 9% recorded in previous periods, with the country having recorded an average of just 3% in recent years.”
However, Hugo Costa also pointed out the structural weaknesses that, in his view, continue to hinder development. Among these, he highlighted what he considered to be a high level of public debt and limited fiscal space, a shortage of foreign exchange, heavy dependence on external flows, and the economy’s limited diversification.
“All of the country’s macroeconomic aggregates are based on two or three sectors or commodities,” he noted, adding that this compromises the economy’s resilience.
Pressure on employment, resulting from a rapidly growing young population, and high levels of informality were also identified as critical challenges.
With regard to sovereign risk, the official emphasized that “Mozambique has been the subject of successive downgrades by international agencies,” with its debt approaching levels considered to be in default.
According to Hugo Costa, in 2025, the credit rating agency Standard & Poor’s (S&P) classified Mozambique’s domestic debt as Selective Default, worsening the government’s financing capacity and putting pressure on corporate performance.
In terms of economic growth, Costa adds that recent data paint a concerning picture: after four consecutive quarters of contraction, Mozambique recorded 4.67% growth in the final quarter of 2025, insufficient to prevent an annual contraction of 0.5%.
“This performance contrasts with the historical average growth of around 8% to 9% recorded in previous periods, with the country having recorded an average of just 3% in recent years.”
The official added that the outlook for 2026 “remains unfavorable,” citing projections that point to growth below 3%, which could even fall below 2%, according to the International Monetary Fund (IMF), or hover around 0.5%, according to the World Bank’s most recent revisions. A scenario that, according to the head of Financial Markets and Treasury at BCI, could result in two consecutive years of economic stagnation.
Given this situation, Hugo Costa argued that the sustainability of public debt, the implementation of fiscal reforms, and the completion of major infrastructure projects will be decisive for Mozambique’s economic future, in a context that also demands social stability and security.
Source: Diário Económico
