Development Cooperation with Mozambique

Development cooperation has significantly shaped Mozambique's economic and social landscape, although challenges such as poverty—affecting 62.8% of the population in 2023—and inequality persist. This analysis explores the key contributions of development partners to Mozambique's economy, focusing on economic stabilization, social development, climate resilience, and governance reforms.

Economic Stabilization and Growth

The role of development cooperation in Mozambique's economic stabilization is notable. Fiscal and debt management efforts have led to a reduction in the fiscal deficit, which declined from 5.1% to 2.8% of GDP by 2023. Additionally, hidden debts were resolved, such as a USD 142 million settlement in 2024, helping to restore donor confidence. However, this stabilization comes against a backdrop of slowed growth, with GDP performance averaging 5.4% in 2023 before contracting to 1.9% in 2024 due to political unrest, cyclone damage, and supply chain disruptions.

Infrastructure development funded by organizations like the World Bank, China, and the Millennium Challenge Corporation (MCC) has improved essential services such as roads, ports, and electricity access, which rose to 60% in 2024 from 31% in 2018. This development underpins trade and industrial growth, illustrated by aluminum exports valued at USD 1.28 billion in 2023.

Private-sector development initiatives, particularly from German and EU programs, have bolstered agricultural productivity and export capabilities, creating jobs and reducing dependency on imports.

Social Development

On the social front, significant contributions to health and education have been made by agencies like USAID, UNICEF, and the UK government, resulting in reduced malaria prevalence and support for 1.9 million people receiving HIV/AIDS treatment. In terms of education, 1.5 million students were enrolled in schools, although the quality remains a concern, with youth illiteracy rates at 31.4%.

Social protection programs funded by the World Bank and the World Food Programme (WFP) provide essential safety nets for 1.2 million vulnerable households, combating poverty exacerbated by climatic shocks and conflict. Additionally, initiatives aimed at empowering youth and women have been supported, although high unemployment remains an issue, particularly within the predominantly informal labor sector where 80% of employment is concentrated.

Climate Resilience and Humanitarian Support

Addressing climate resilience is another critical area where development cooperation has made an impact. Projects led by the World Bank, Germany, and the United Nations Development Programme (UNDP) have enhanced disaster preparedness by strengthening early warning systems and rebuilding infrastructure damaged by cyclones such as Idai and Chido.

The humanitarian crisis in Cabo Delgado, marked by ongoing violence and displacement affecting over 580,000 individuals, continues to require significant international support. Initiatives by Norway, GIZ, and UN agencies aim to improve social cohesion and humanitarian conditions in the region despite the persistent insurgency.

Governance and Institutional Reforms

Development cooperation has also focused on enhancing governance and institutional frameworks within Mozambique. Efforts supported by the IMF and Germany towards improved transparency and accountability, including the introduction of the Sovereign Wealth Fund (SWF) Law and anti-corruption measures, are crucial for managing LNG revenues.

Programs implemented by the European Union and the German Federal Ministry for Economic Cooperation and Development (BMZ) have bolstered municipal governance, aimed at increasing local revenues and service delivery, although the political dominance of FRELIMO poses challenges to fostering political pluralism.

While development cooperation has stabilized Mozambique's economy and enhanced infrastructure, it has also exposed some persistent challenges. Growth primarily driven by extractive industries tends to benefit elites, leaving non-extractive sectors and rural areas lagging behind. With poverty remaining high at 62.8% and growing inequality contributing to social unrest, a balanced approach to economic inclusivity is vital.

Furthermore, the heavy reliance on donor funding, which constitutes only 2% of GDP, raises sustainability concerns, especially with public debt forecasted to reach 97.5% of GDP in 2025. Coordination gaps are also evident, as overlapping donor programs alongside weak local capacities can lead to inefficiencies.

Summary

Development cooperation in Mozambique, led by the IMF, World Bank, Germany, the U.S., EU, and various UN agencies, has yielded significant economic stabilization, infrastructure improvements, and social advancements. Achievements such as reduced inflation, enhanced electricity access, and support for vulnerable households demonstrate the impact of international assistance. However, ongoing issues related to poverty, inequality, external risks from conflict and climate shocks underscore the need for more effective coordination and inclusive policies.

Key Actors in Development cooperation with Mozambique

Development cooperation in Mozambique involves a diverse set of actors, including multilateral organizations, bilateral donors, and non-governmental entities, each playing distinct roles in addressing the country's multidimensional challenges.