Mozambique: Harsh economic warning from Standard Bank and Oxford Economics – By Joseph Hanlon

Harsh warnings from Oxford Economics & Standard Bank Forecasting firm Oxford Economics last week (2 March) raised Mozambique to the highest economic and political risk of the 25 African countries it surveys, with Malawi now second and Zimbabwe third. And Standard Bank this Monday (9 March) morning in its Africa Flash Note warned that “the Iran Middle East crisis brings increased risks to Mozambique’s fragile Balance Of Payments and fiscal position,” due to increases in fuel and other import costs. But most importantly, Standard Bank warns that “it may take nearly a decade for a material contribution from LNG [Liquified Natural Gas] to government revenue, and multiple decades and reform progress for LNG to start having an impact on poverty alleviation” with “poverty affecting nearly 70% of the population.” Mozambique’s National Statistics Institute says GDP fell last year, by 0.5%, with growth in extractive industries but with the rest of the economy contracting by 1.6%.

Standard Bank predicts GDP growth of 1.5% this year and Oxford Economics only 0.3%, both much less than previous predictions. Oxford Economics said “Unfortunately, we foresee Mozambique’s economy facing another difficult year in 2026.” Oxford Economics says risks have become worse because of slow growth, increasing public debt, IMF-enforced devaluation (Oxford say this year, Standard says next year), and political uncertainty remaining at a high level. Oxford says the tensions that caused demonstrations last year have not reduced, and devaluation will increase prices and the cost of living.

The financial crisis and shortage of foreign exchange is worsening. Commercial banks are restricting foreign credit card and purchase payments. Public debt rose almost 5% in 2025 compared to the previous year, closing at $18 billion, Lusa reported on Friday (6 March).

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Mozambique cannot obtain any more foreign loans, and it is surviving on domestic debt, which rose to $7bn last year; of that $1.4 bn is provided by the Bank of Mozambique. Last year domestic interest amounted to $637mn and interest on external financing also reached $200mn last year. Increasingly the debt is seen as unsustainable.

Government also has no money for promised projects, including road repairs. And STV reports that the public hospitals cannot obtain drugs because government has failed to pay its debts. Frelimo sees a different picture, but can the Frelimo economy survive?

All of Frelimo’s statements have been optimistic and that they will be saved by the gas, with money coming in to government sooner than Standard Bank predicts. Although external support has decreased, Frelimo appears to feel that it has gotten away with stealing the 2023 and 2024 elections and killing more than 400 young people in the subsequent demonstrations. Therefore it is betting that it can use force to stay in power through the 2028 and 2029 elections and on to the start of the gas money.

Over the past three decades Frelimo has created an oligarch service economy, dependent on state contracts, importing, and taking commissions (“rents”) from the extractive sector, and no invesment in the productive sector or job creation. But even for the Frelimo oligarchs there are clouds on the horizon. Economic historian Peter Turchin writes of “elite overproduction” with too many “elite aspirants” competing for a limited number of positions in the upper echelons of politics and business.

This is already happening in Mozambique. President Armando Guebuza turned the civil service into a branch of Frelimo. The three presidents – Joaquim Chissano, Armando Guebuza and Filipe Nyusi have ensured that their extended families have businesses, mines, and secure positions.

And when they were presidents they brought in ministers and others in key positions who became part the inner circle of “elite aspirants”. The political and economic battles between the groups allied to Chissano, Guebuza, and Nyusi have become public, and Chapo is having to fight them to build his own group.

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