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Mozambique 2025: Economic Realities

The year 2025 positions Mozambique at a critical and complex inflection point, defined by the immense potential of its natural gas megaprojects juxtaposed against severe domestic challenges, including high debt, acute political instability, and foreign currency shortages. The economic narrative for the year is one of fragile recovery heavily reliant on the extractive industry, while the government attempts to stabilize public finances and implement key regulatory reforms.

Macroeconomic Resilience and Recovery

Despite a promising recovery trend that saw 5.4% GDP growth in 2023, Mozambique's economy faced significant turbulence leading into 2025.

  • Growth Outlook: Real GDP growth declined to 2.2% in 2024, driven by post-election protests and climate shocks. The economy experienced a consecutive GDP contraction of 3.9% in the first quarter of 2025, signaling a recession. However, projections for the remainder of 2025 suggest a rebound, largely fueled by the extractive sector. Growth forecasts vary, ranging from a modest 2.5% to 3.0%, with government forecasts anticipating 4.7%. Nominal GDP is projected to increase to approximately USD 23.77 billion in 2025.

  • Inflation and Monetary Policy: Inflation is expected to remain low, averaging around 4.4% or below 5%. The Banco de Moçambique (BM) actively pursued stabilization, continuing its loosening monetary policy cycle. In September 2025, the BM slashed its key MIMO interest rate to 10.25%, marking the 11th consecutive reduction, based largely on the expectation of achieving single-digit inflation in the medium term.

  • Fiscal and Debt Challenges: Fiscal conditions remain strained. The 2025 Economic and Social Plan and State Budget (PESOE) projects a budget deficit of USD $1.9 billion, or 2.9% of GDP. Public sector debt remains high, projected at 98.7% of GDP in 2025, or 96.5% of GDP by some estimates, though external debt is expected to fall to 67.6% of GDP. To manage these risks, the government approved the Medium-Term Debt Management Strategy for 2025-2029 in November 2025.

The Extractive Engine: LNG and Investment Boom

Foreign Direct Investment (FDI) remains the primary catalyst for economic activity, concentrated overwhelmingly in the extractive sector, particularly LNG. Mozambique was the sixth largest recipient of FDI in Africa in 2023.

  • FDI Surge: The momentum continued into 2025, with FDI reaching US$1.6 billion in the first quarter, more than double the US$779.2 million recorded in Q1 2024. Nearly US$1.234 billion of this was invested in the natural gas sector. The government anticipates total FDI for 2025 could reach US$5.071 billion.

  • Major Gas Projects: The Coral Sul FLNG project (Eni-led) continues to drive growth. Progress is anticipated on the other megaprojects: Eni is awaiting approval to advance the Coral Norte FLNG terminal, and Exxon Mobil is nearing the lifting of force majeure on its Rovuma LNG (Area 4) project, paving the way for further investment decisions.

  • Revenue Governance: Signaling a new era of fiscal governance, Mozambique finalized the launch of its Sovereign Wealth Fund (SWF) in October 2025, designed to oversee revenues generated from natural gas operations.

  • Mining Sector: The mining sector remains attractive. Investment projects valued at approximately US$5 billion were approved in the first half of 2025, with potential to create 17,000 jobs across various sectors. However, the government suspended all mining licenses in Manica province in October 2025 due to widespread river pollution.

Critical Headwinds: Security, Political, and Financial Risks

The ambitious resource-led development faces severe headwinds, many linked to the political landscape of 2025.

  • Political Instability and Security: The year began with high tension and turbulence following the 2024 general elections, which were characterized as "markedly fraudulent," leading to widespread protests. This instability resulted in economic disruption and a need for increased public security spending. The threat of insurgency in Cabo Delgado remains the primary operational risk, hindering major LNG projects and impacting investor confidence.

  • Foreign Currency Scarcity: Businesses faced an acute foreign currency shortage throughout 2025, which hindered essential imports like wheat. This scarcity was fueled by a "dollarization" process following the 2024 elections, which shook public confidence and prompted a mass attempt to withdraw foreign currency from banks. The government announced plans to inject $500 million in foreign exchange to ease import difficulties.

  • Regulatory Environment: The business environment is challenging due to complex bureaucracy, unclear customs procedures, and systemic corruption. Furthermore, stakeholders noted that a proposed New Commercial Code is more likely to complicate than simplify the business environment.

Strategic Development and Diversification Focus

Despite the volatility, the government and foreign partners continued to drive strategic investments aimed at long-term structural transformation beyond extractives.

  • Infrastructure and Logistics: Infrastructure investment is essential for Mozambique's role as a regional trade hub for landlocked neighbors. In 2025, DP World began a USD 165 million development of the Port of Maputo container terminal. The government is pursuing a plan to boost the logistics sector's contribution to GDP from 8% to 20% by 2027. Efforts are focused on enhancing customs digitalization and efficiency, recognized as critical challenges for success in regional trade.

  • Energy and Renewables: The country is leveraging its immense renewable potential, setting a target of 98% renewable electricity generation by 2025 (including hydropower). The government aims for universal energy access by 2030. Plans are underway to increase total installed capacity to over 6,000 MW by 2030.

  • Local Content (LCR) and Industrialization: A key priority for the new administration is linking megaprojects to job-creating growth. In July 2025, the government moved forward with a bill to "require" megaprojects to hire locally and purchase locally produced goods and services. Maximizing local content is considered central to the LNG project strategy.

Summary

Mozambique's economic narrative in 2025 is a tug-of-war: the immense capital gravity of gas projects pulls the country toward recovery and high GDP forecasts, yet the foundational pillars—political stability, transparent governance, and financial liquidity—remain weak, creating systemic risks that threaten to divert the resource wealth away from structural transformation and poverty reduction. The success of 2025 hinges less on the size of the FDI influx and more on the government's ability to manage the political and fiscal fallout from 2024.