Economy of Mozambique
The economy of Mozambique has de-
veloped since the end of the Mozambican
Civil War (1977-1992), but the country is still
one of the world’s poorest and most under-
developed. Civil war opposing RENAMO to
FRELIMO,
ineffective
socialist
economic
policies, government mismanagement, and
severe droughts plagued Mozambique’s eco-
nomy throughout the 1980s, leaving it heav-
ily dependent on external assistance. In
1987, the government embarked on a series
of macroeconomic reforms designed to stabil-
ize the economy. These steps, combined with
donor assistance and with political stability
since the multi-party elections in 1994, have
led to dramatic improvements in the coun-
try’s growth rate. Inflation was brought to
single digits during the late 1990s although it
returned to double digits in 2000-02. Fiscal
reforms,
including the introduction of a
value-added tax and reform of the customs
service, have improved the government’s rev-
enue collection abilities. In spite of these
gains, Mozambique remains dependent upon
foreign assistance for much of its annual
budget, and a large majority of the popula-
tion remains below the poverty line. Subsist-
ence agriculture continues to employ the vast
majority of the country’s workforce. A sub-
stantial trade imbalance persists although
the opening of the MOZAL aluminium smelt-
er, the country’s largest foreign investment
project to date has increased export earn-
ings. Additional investment projects in titani-
um extraction and processing and garment
manufacturing should further close the im-
port/export gap. Mozambique’s once substan-
tial foreign debt has been reduced through
forgiveness and rescheduling under
the
IMF’s Heavily
Indebted Poor Countries
(HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level.
History
Portuguese rule
See also: Portuguese East Africa
Although the Portuguese participated in the
trading networks of East Africa as early as
the 16th century, they did not establish hege-
monic (total) colonial dominance over the e