Mozambique: World Bank warns of social & ‘economic instability’ – By Joseph Hanlon

World Bank warns of social & ‘economic instability’ which could even threaten the gas projects The Mozambican economy is a house of cards which will collapse, and probably sooner rather than later, shows the World Bank, in an unusually harsh report published 19 March. “The cost of inaction is rising and could be severe.” The Bank stresses that “economic instability could jeopardize more than $50 billion in foreign direct investment”, particularly in the LNG. An economic crisis could “undermine living standards, strain social cohesion, and weaken the government’s capacity to deliver essential services.” Lack of social cohesion is the Bank’s cautious way of saying social unrest and protests.

“The security situation in northern Mozambique remains volatile, with a recent increase in the number of people being displaced,” the Bank points out. It also notes that civil unrest following the October 2024 election came after what is calls the “lost decade” 2016-2025. In the lost decade, Mozambique has become “the second-poorest country and among the 10 most unequal in the world,” the report stresses.

“Between 2015 and 2020, urban poverty increased sharply from 32% to 44% while rural poverty rose from 56% to 71%” of the rural and urban populations based on the national poverty rate ($0.67 per day). In 2015, 12.3 mn Mozambicans lived in poverty but the number jumped to 19.9 mn in 2022. The report is particularly strong and important because the World Bank remains the one international agency to continue to back Frelimo, even as bilateral aid has fallen and the IMF halted its support.

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The report team was headed by two young World Bank economists without Mozambique links and may be intended to challenge Bank policies in Mozambique. Detailed data and charts show the extent to the crisis. The report was posted by the World Bank on 19 March but without a press notice.Mozambique Economic Update, March 2026: From Fragility to Stability – Why Fiscal Reforms Cannot Wait.

Government’s own projections show it will get worse Government’s own economic growth projections are of 1-2% growth in 2026-28, but population is growing more rapidly so that actually means an increase in poverty and no improvement in living standards. Frelimo continues to says the LNG revenues will bring relief in five years. But that will not happen.

The Bank report says that government’s own figures show that overspending and borrowing is growing so rapidly that it will absorb most of the gas money, and it will be 15 years before there is significant gas revenue available to spend. If there are no changes in government spending, “a significant share of projected LNG revenues through 2042 [will] be diverted to cover accumulated fiscal imbalances instead of financing strategic development priorities,” the Bank estimates. The report highlights three crises which need particular action.

+First the civil service wage bill of 15% of GDP in 2025 is among the highest levels globally. Mozambique has a small civil service paid high salaries and allowances. +Second is the rapidly growing debt.

Wages and interest absorbed 87% of the tax revenue in 2025, leaving little for infrastructure and other development. The report says “public debt is assessed as unsustainable, and delays in debt servicing and expenditure arrears are large.” Under current policies the fiscal situation is likely to worsen further. The overall government deficit is projected to widen to about 6% of GDP in 2026-2027. +The third necessary issue is that “stagnant performance of agriculture is keeping the rural poor in a poverty trap.”

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