Mozambique stands at a critical juncture – World Bank

The World Bank says that Mozambique “stands at a critical juncture”, in which it “needs to ease fiscal pressures while accelerating growth and strengthening social cohesion,” as it grapples with “low economic growth, challenging macro-fiscal conditions and rising social demands.” In the Mozambique Economic Update report, released today and titled “From Fragility to Stability – Why Fiscal Reforms Cannot Wait”, the World Bank notes that real Gross Domestic Product (GDP) growth “sharply declined from 5.5% to 2.2% between 2023 and 2024, and then contracted by 0.5% in 2025.” “Economic activity was disrupted by civil unrest following the October 2024 elections, but large macroeconomic imbalances have been weighing heavily on growth since 2022. (…) Acute fiscal pressures and persistent foreign exchange shortages have weakened investor confidence and private-sector activity,” reads the document, which also highlights that inflation increased in 2025, “primarily driven by rising food prices, but pressures have been relatively contained.” “Poverty and inequality remain very high, owing to subdued economic growth and limited job opportunities,” it states, also warning that fiscal pressures “are undermining macroeconomic stability and development spending.” The fiscal deficit declined from 6.1% to 4.1% of GDP between 2024 and 2025, “but at the expense of capital spending,” warns the World Bank, adding that in contrast, the very large public sector wage bill – around 15% of GDP, “among the highest in the world” – and high interest payments, about 3.7% of GDP, “absorbed 87% of the tax revenue” last year. “Revenue performance stagnated in 2025, partly due to lower value-added tax (VAT) collection.

These fiscal pressures limit the space available for investments in public infrastructure, improvements in public service delivery, and the mitigation of commodity and climate shocks.” The World Bank update admits that projected economic growth for 2026–2028 will be between 1 and 2% of GDP, “insufficient to improve the population’s living standards,” below the projected population growth of 2.8%, “which means it will not significantly reduce poverty.” Real Gross National Income (GNI) per capita fell by 8% between 2015 and 2024, and is expected to remain below 2015 levels until 2028, “weakening the country’s social contract,” warns the World Bank. It also notes that “poverty is expected to remain stubbornly high, with little progress in job creation or service improvement”: “Every year, 500,000 Mozambicans enter the labour market, but only 30,000 formal jobs are created.” The World Bank assumes that the outlook “is surrounded by uncertainty, with risks skewed to the downside,” while on the “positive side”, the resumption of TotalEnergies’ natural gas project in Cabo Delgado and Mozambique’s removal from the grey list for money laundering “could increase foreign direct investment.” “However, the economy remains vulnerable to socio-political risks and external shocks. Fiscal space to respond to shocks is extremely limited (…) Without decisive action, macroeconomic imbalances could worsen,” it warns.