The economic week brought to light important developments for the Mozambican economy, highlighting the increase in the contribution of public companies to GDP, legal tensions in the case of hidden debts and concerns about the impact of climate change. Although the primary and tertiary sectors showed resilience in the second quarter of 2024, the challenges associated with debt and climate change continue to cast uncertainty over medium-term growth.
Public and state-owned companies increased their contribution to Gross Domestic Product (GDP) to 3.2 per cent of the economy at the end of 2023, an increase of 0.4 percentage points compared to 2020.
According to the Fiscal Risks for 2025 report, released by the Ministry of Economy and Finance (MEF), this increase is due to the economic recovery following the covid-19 pandemic.
Revenues from public companies include taxes that reached 20 billion meticals (254.3 million dollars) annually, while dividends grew by 14%, totalling 8.9 billion meticals (113 million dollars) in 2023. Hidroeléctrica de Cahora Bassa and Portos e Caminhos-de-Ferro de Moçambique were the biggest contributors.
However, state subsidies to public companies fell by around 1.2 billion meticals (15.2 million dollars) in 2023, with an impact on the operations of companies such as Electricidade de Moçambique and Linhas Aéreas de Moçambique.
Hidden Debts: Privinvest in Legal Dispute
In the case of hidden debts, Privinvest asked the London Commercial Court to suspend enforcement of a payment of two billion dollars (126.4 billion meticals) to Mozambique.
The shipping company claimed that the lack of funds could lead to insolvency if the payment is demanded, and argued that important documents have not been disclosed by Mozambique, jeopardising the fairness of the trial.
The court’s initial ruling, handed down in July 2023, had granted Mozambique the right to receive 825 million dollars (52.14 billion meticals), as well as determining compensation for the 1.5 billion dollars (94.8 billion meticals) that the country owes to banks and bondholders.
The legal dispute is still ongoing, with Mozambique demanding interest of 40 million pounds and legal costs estimated at 49 million dollars.
Climate change threatens growth in 2025
The impact of climate change remains a central concern for Mozambique’s economic growth. According to the MEF’s latest Fiscal Risks report, the forecast for 2025 points to a reduction in growth of 0.7 percentage points due to the influence of the La Niña phenomenon, which is expected to bring above-normal rainfall to the Centre and South regions between October 2024 and March 2025.
Mozambique, one of the countries most vulnerable to climate change globally, faced 59 natural disasters between 2012 and 2024, with more than 8.9 million people affected.
The ongoing impact of natural disasters has put pressure on the government, which is trying to balance humanitarian needs with fiscal sustainability and economic growth.
Growth of 4.5 per cent in the second quarter of 2024
Despite the challenges, the economy grew by 4.5 per cent in the second quarter of 2024, driven mainly by the extractive sector, which showed a variation of 17.48 per cent, according to the National Statistics Institute (INE). The fishing sector also showed resilience, with growth of 1.61 per cent, while the tertiary sector saw growth of 3.61 per cent, with the hotel and restaurant sector standing out.
The accumulated figure for the first half of 2024 was 3.86 per cent, with the government maintaining its forecast of 5.5 per cent growth for the year, despite the uncertainties brought about by climate change and the unfolding of the hidden debts.
Felisberto Ruco
