Mozambique’s external sector faced considerable strain in 2024, as the combined current and capital account deficit expanded to 2.23 billion USD, equivalent to 10.1% of the nation’s gross domestic product (GDP), according to the Annual Balance of Payments Bulletin 2024 released by the Bank of Mozambique.
This represents a substantial year-on-year increase of 26.4%, underscoring mounting pressures on the country’s balance of payments framework. The principal driver of the widening deficit was a deterioration in the current account, which alone recorded a shortfall of 2.49 billion USD, up 13.2% from the previous year.
The bulletin attributes this widening imbalance to multiple structural and external factors. Notably, the primary income deficit escalated by 37%, reflecting increased outflows such as dividend repatriations and interest payments on external liabilities. Concurrently, the services account deficit grew by 11%, indicative of Mozambique’s reliance on foreign providers for sectors including logistics, finance, and consultancy. Furthermore, the positive balance of current transfers—comprising remittances and official grants—declined by 18.3%, weakening an essential buffer that has historically supported household consumption and fiscal relief.
Amidst these imbalances, the report highlights a significant bright spot: foreign direct investment (FDI) surged to 3.55 billion USD, representing an impressive 41.6% increase over 2023. The overwhelming majority—approximately 87.2%—of these inflows were channelled into Mozambique’s extractive industries, underscoring the continued international appetite for the country’s natural resource base, including liquefied natural gas and minerals. South Africa, the Netherlands, Mauritius, and Italy emerged as the primary source countries for this investment activity.
Despite the expanding current and capital account deficits, the overall balance of payments remained in surplus, amounting to 211 million USD. This contributed to an increase in Mozambique’s gross international reserves, which reached 3.8 billion USD. The central bank noted that these reserves are sufficient to cover up to 5.2 months of imports, excluding megaprojects—a level generally considered adequate by international financial standards.
Nonetheless, the nation’s net international investment position (NIIP) continued its negative trajectory, with net external liabilities increasing by 2.61% to 71.3 billion USD. This indicates that the pace of liability accumulation is outstripping the accumulation of external assets, thereby reducing Mozambique’s financial autonomy in global markets. The Bank of Mozambique cautioned that sustained imbalances in the NIIP could expose the country to refinancing risks and increased vulnerability to global financial shocks.
As Mozambique continues to attract capital-intensive investments, particularly in resource-based sectors, its policymakers face the dual challenge of managing short-term external pressures while laying the foundation for long-term structural transformation. Addressing the persistent deficits in income and services accounts, alongside bolstering domestic productive capacity, will be crucial in enhancing external sustainability.
Analysts note that while the growing FDI inflows reflect confidence in Mozambique’s resource potential, the concentration in a single sector could amplify the country’s exposure to commodity price volatility and external shocks. Diversifying the investment landscape and improving export competitiveness across non-extractive sectors may help cushion future imbalances.
The medium-term outlook will hinge on how effectively Mozambique can leverage its investment inflows to create broad-based economic growth while mitigating its external vulnerabilities. Enhancing the quality of capital formation, strengthening institutional frameworks, and promoting export-oriented industrialisation remain central to achieving a more resilient external position in the years ahead.
