- Basic data
- Public finances and the state budget
- Banking system
- Tax System
The economy was expected to accelerate slightly by 2.1% in 2021, thanks to growing global demand for coal and aluminum, Mozambique’s main export commodities. The revival of the Mozambican economy was also supported by agricultural activity and food production thanks to more favorable climatic conditions during the year. In the following year, the production of liquefied natural gas (LNG) is expected to start as part of the Coral Sul project in Area 4 (the so-called Area 4) by the Italian ENI, which should further support economic growth. Total’s Area 1 project, which was supposed to start production in 2024, was suspended in March and April 2021 due to a direct threat from terrorists, and construction work is not expected to resume until 2023 with the start of mining in in 2027. The last of the three most important LNG projects this time in area 4 (so-called Area 4) by the American ExxonMobil is still uncertain and the announcement of the planned investment has been postponed. The impact of the COVID-19 pandemic on the Mozambican economy is not as significant as in the surrounding economies, however tourism and some types of services were particularly affected. Mozambique continues to face a debt crisis due to hidden loans from previous years that were revealed in 2017. The IMF refuses direct budget support to Mozambique until the issue is resolved. In 2021, public debt is expected to reach 123% of GDP, which would represent a 3% increase compared to 2020. The average inflation rate is estimated at 5.6% in 2021 due to rising prices of imported commodities, and stronger inflationary pressures are expected in in 2022 due to the start of natural gas extraction. The average unemployment rate is expected to reach around 20% in 2021, with that the situation is different across individual provinces. Traditionally, the highest unemployment rate is in Maputo province and Maputo city, where it is around 32%.
According to cheeroutdoor.com, the Mozambican economy depends on the export of hard coal and aluminum, and in the future it is also expected to export liquefied natural gas thanks to the huge reserves off the coast of the northern province of Cabo Delgado. The country imports most of the consumer goods and industrial products due to the limited domestic production and industrialization so far. Agriculture is rather of a family nature with limited production so far, with the exception of a few larger agricultural enterprises and foreign investors.
|GDP growth (%)||2.3||-0.9||2.1||4.2||5.1|
|Export of goods (billion USD)||4.7||3.6||5.6||6.1||6.5|
|Import of goods (billion USD)||7.4||6.4||8.6||8,9||9.1|
|Trade Balance (Billion USD)||-2.1||-2.3||-1.9||-2.1||-1.8|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||07.VII||07.VII||07.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-7.4|
|Public debt (% of GDP)||91.2|
|Current account balance (billion USD)||-3.6|
Mozambique has long-term high state budget deficits due to high indebtedness. In 2021, public debt reached 91.2% of GDP, which represented a slight increase compared to 2020. The state budget ended in deficit of 7.4% of GDP in 2021 and was mainly financed by domestic loans and preferential financing, as access to capital markets was still limited.
The current account balance reached a deficit of USD billion in 2021. The trade balance with a deficit of USD 2.26 billion and the balance of services with a deficit of USD 1.74 billion contributed the most to this result.
The central bank – Banco de Moçambique – has the function of banking supervision and monetary policy management. Its main current effort is to limit the inflationary pressures caused by the deteriorating economic situation, the COVID-19 pandemic, the depreciation of the local currency, the metical, and the high trade deficit. In response to inflationary flows, the Central Bank of Mozambique increased the interest rate to 13.25% from 10.25% in January 2021.
There are 18 commercial banks operating in Mozambique and Portuguese banks are the most widespread. The banking system is developing rapidly and is relatively stable. Commercial banks provide all common services (letters of credit, short-term loans, financial transfers, savings and money exchange, internet banking, credit and payment cards, etc.). The domestic payment system uses the Mozambican metical (as of 5/16/2020, the exchange rate was 63.83 MT/USD and 66.54 MT/EUR), the most used currency in foreign payment systems is USD and EUR. Using VISA and Mastercard payment cards works well and most merchants in larger cities have payment terminals.
The six largest and most important commercial banks in Mozambique:
- Millennium bim – rated as the best bank in Mozambique for the 11th time in 2020 by three independent evaluators, www.millenniumbim.co.mz. It is a Portuguese bank.
- Barclays Bank Mozambique, English bank, www.barclays.co.mz
- Banco Nacional de Investimento, Portuguese-Mozambican Bank, www.bni.co.mz
- Banco Comercial e de Investimentos, Portuguese bank, www.bci.co.mz
- First National Bank (FNB), a South African bank, https://www.fnb.co.mz
- Moza Banco, SA, Mozambican bank, www.mozabanco.co.mz
The Mozambican tax system is inspired by the Portuguese and South African systems and is divided between the two basic groups of direct and indirect taxes. The system is relatively clear and provides benefits to the poorest sections of the population, especially from the point of view of small businesses.
Current tax type overview:
- industrial contribution tax (Contribuiçao Industrial)
- income tax (Imposto sobre os Rendimentos de Trabalho), for legal entities it varies between 6-32% depending on the type of business, for natural persons 0-32% depending on the amount of income
- dividend tax – 10-20%
- additional tax (Imposto Complementar – capital gains,
- share transfer tax, 8-40%)
- national reconstruction tax (Imposto de Reconstruçao Nacional)
- property transfer tax (Imposto sobre a Transmissao de Imóveis)
- property tax (Contribuiçao Predial, 10%)
- gift and inheritance tax (Imposto de Doações e Sucessões, 1-30%)
- value added tax (IVA, 17%), banking, educational, health and social services, services related to drilling exploration, infrastructure construction and export of goods are exempt.
- sales tax (Imposto de Circulaçao)
- consumption tax (Imposto sobre consumos específicos – applies to so-called luxury goods, which include sugar, clothing 30%, cars, alcoholic beverages 40%, tobacco 75%)
- tourist tax (Imposto de Turismo)
- service tax, stamp duty (Imposto de Selo e Emolumentos)
Companies registered in the “Special Economic Zone” (in the province of Tete and Zambezia) have a tax holiday for 5 years, the next 5 years they pay only half the corporate tax, the following years 25%. Companies operating in the “Free Industrial Zone” (Maputo, Beira) are exempt from paying profit tax for 10 years, the following 5 years they pay 50% tax, then 25%. For investors in priority sectors such as infrastructure, agriculture, mining and oil industry, tourism and services, there are a number of other incentives (concessional depreciation, remission of import duties or VAT). The amount of relief depends on the location of the investment, its size and the number of local employees.