Mozambique faces significant short- and medium-term challenges, visible in economic growth slowing to a near 15-year low, tensions in the foreign exchange market, inflation risks and uncertainties, credit rating downgrades, and the suspension of some international donor funding. Meanwhile, inflows of foreign direct investment (FDI) are no longer sufficient to cover the current account deficit, confirming a continued process of debt accumulation.
Economic activity contracted by 0.5% in 2025 (down from 2.1% in 2024), with the slowdown driven by declining imports and exports from extractive industry megaprojects, amid delays in LNG investments and post-election instability. In addition, pressure in the foreign exchange market was evident, reducing business-sector imports and domestic demand for credit. In contrast, there was an annual reduction of 325 basis points in the monetary policy interest rate (MIMO) and an increase in net international reserves (by USD 384 million), which now cover six months of imports of goods and services (excluding major projects), according to data from the Bank of Mozambique.
By the end of 2026, no more favorable economic environment is expected, with both adverse international conditions and persistent domestic challenges. Beyond the factors already mentioned, which carry over from the previous year, limited access to foreign currency is constraining imports of intermediate and capital goods needed for consumption and investment, including the development of megaprojects.
Considering the escalation of the conflict in the Middle East and the resulting slowdown in the global economy, a reduction in donor funding is expected, putting pressure on public finances. As a result, the public debt ratio is projected to exceed the sustainability threshold set by the International Monetary Fund (IMF) of 70% of GDP. The high share of external public debt highlights the economy’s vulnerability, reinforcing the importance of resuming international donor flows (a key source of financing) and effectively implementing major natural gas extraction projects in the northern region of the country.
“It is crucial to adopt measures aimed at restoring the balance between the supply and demand for foreign currency. Diversified and inclusive growth requires a revision of the economic model, with a strong focus on productive chains and industrialization.”
Weak domestic production of essential goods, falling exports of coal and other minerals (following lower international prices and weakening external demand), declining private investment, and reduced support from cooperation partners have been behind the foreign exchange pressures that have characterized Mozambique’s macro-financial environment since late 2024.
The IMF states that the exchange rate of the metical should adjust freely to international trade and financial flows. However, it also monitors the evolution of the effective exchange rate against a broad basket of currencies to ensure external competitiveness and adequate international reserves.
Analysis of the metical’s performance against the US dollar (USD/MZN) shows that the period from 2022 to the present has been marked by relatively low volatility in the foreign exchange market. In the first three months of 2026, the metical remained stable against the US dollar, trading around 63.9 meticais per USD. However, exchange houses quoted significantly higher rates (between 69 and 71 MZN/USD), creating distortions in the foreign exchange market despite comfortable reserve levels. The medium-term fiscal scenario (2026–2028) assumes the maintenance of a stable average USD/MZN exchange rate around 63.9, supported by increased production for export and foreign exchange market reforms.
Foreign Exchange Market Redefines National Economic Challenges and Outlook
In recent years, Mozambique has been able to accumulate international reserves in a favorable context of foreign direct investment inflows, donor funding, and strong export performance (aluminum, coal, electricity, and natural gas). However, this performance has slowed recently due to declining capital inflows and weaker export revenues, resulting in worsening macroeconomic and financial imbalances, particularly foreign exchange market tensions.
For 2026, a decline in accumulated international reserves is expected, driven by reduced capital inflows linked to megaprojects and weak export growth, particularly in the aluminum industry. This is expected to intensify exchange rate and inflationary pressures. The limited availability of foreign currency in the domestic market remains a major constraint affecting import and export activity in Mozambique.
Coordinated action among stakeholders is essential to address this situation swiftly and effectively, ensuring macroeconomic stability, business sustainability, job preservation, and the country’s credibility.
Mozambique needs to import most capital goods and consumer goods, resulting in a persistent structural balance of payments deficit. Therefore, measures to restore balance between foreign currency supply and demand are critical. Diversified and inclusive growth requires a revision of the economic model, with a strong focus on production chains and industrialization, a better business environment, and increased private investment.
The creation of an incentive package to stimulate high-value-added projects capable of generating multiplier effects across broad sectors of the Mozambican economy—enabling import substitution—could help ease exchange rate pressures in the short and medium term.
Although not widely used so far, currency swaps with foreign central banks, such as in Nigeria and South Africa, could help mitigate temporary foreign currency shortages, according to the IMF.
