Political & economic relation

Introduction

Situated in southern Africa and bordering the Indian Ocean, Mozambique has a population of 21 million and a land area of around 800,000 km², roughly equal to the combined area of Italy and Spain. After gaining independence from Portugal in 1975, Mozambique endured a long period of civil war that ended in 1992. Although having experienced significant economic recovery in recent years, it still remains relatively poor country. Mozambique has been regularly hit by natural disasters, mainly floods, droughts and cyclones.

Most of the rural population survives on subsistence agriculture, making them vulnerable to these natural disasters. HIV/AIDS remains a major and growing problem, which is already having an impact on the economy and on development in all sectors.

Mozambique is highly dependent on international assistance. The EU (European Commission and Member States) is one of the major players among donors, accounting for approximately 70% of development assistance to the country. The EU, in close coordination with the other co-operation partners, is seeking to ensure that assistance promotes sustainable development and generates long-term benefits.

The strategy for EC-Mozambique co-operation aims to help the country to achieve its action plan (Poverty Reduction Strategy) to decrease the incidence of poverty and promote fast, sustainable and broad-based growth.

The new EC-Mozambique Country Strategy Paper for 2008-2013 pdf - 2 MB [2 MB] was signed in December 2007. The National Indicative Programme (NIP) has a total budget of EUR 622 million for programmable aid (envelope A). The EC increased the allocation of resources for Mozambique’s unforeseen needs by EUR 12.11 million in response to soaring prices and the resulting macroeconomic and social effects. An addendum to the CSP pdf - 27 KB [27 KB] and NIP regarding this increase was signed on 4 June 2009.

The NIP funding coming from the 10th European Development Fund (EDF) is allocated to several priority areas. In order to help maintain macroeconomic stability, the EC will continue to support Mozambique’s macroeconomic reform programme through general budget support.

A first focal area is transport infrastructures and regional economic integration. The objective is to alleviate poverty by increasing the access of the poor rural population to public services, markets and job opportunities, while promoting socio-economic growth through increased trade and regional integration. The road network, including regional connections, will therefore be expanded and improved.

The second focal sector is agriculture and rural development. Given the population’s dependency on agriculture, improving the performance of this industry has great potential to reduce poverty by increasing food security and income.

Action in non-focal sectors will continue to support the health sector budget. Apart from mainstreaming governance in the selected focal sectors and budget support, governance measures in favour of human rights, justice, anti-corruption, Parliament and civil society are envisaged, in addition to the governance-based initiative in favour of the PALOP/Timor Leste countries (Lusophone countries). Finally, support for trade is also envisaged within this framework.

Political and economic situation

On 28 October 2009, Mozambique held its fourth presidential and legislative elections and, for the first time, provincial assembly elections. The results were an overwhelming victory for the incumbent President and ruling party Frelimo in presidential, parliamentary and provincial assembly elections. Frelimo won more than two-thirds of the parliamentary seats. There was a further decline for the main opposition party Renamo, and a new party MDM became the third political force in the country winning seats in parliament for the first time. Frelimo also won an absolute majority in all the provincial assemblies.

Following an invitation from the Mozambican government, an EU Election Observation Mission (EU EOM) was deployed in Mozambique to monitor the various phases of the electoral process. International observers praised, in general, a very well-managed and peaceful election day, but raised concerns about complex and confusing electoral legislation, transparency shortcomings and constraint of voters' choice. The Frelimo landslide victory helped to maintain a minimum of consensus around the process and the acceptance of the overall outcome, in spite of the shortcomings that marked the election process. The EU EOM published a detailed final report on the elections with findings and recommendations for future electoral processes in February 2010. The EU Delegation will continue to support the Electoral reform in the aftermath of 2009 Elections by supporting Government's efforts to improve Electoral law and to implement recommendations that have been singled out in various reports.

The Mozambican economy continues to grow strongly at a fairly stable rate. Real GDP grew by 6 percent in 2009, more than expected, owing to stronger performance of the construction, energy and financial sectors. This is a continuation of the high growth rates achieved during the past decade (on average 8%). This performance was driven by healthy agriculture growth, significant donor support, mega-projects construction (which have proved to have a small impact on employment and tax base), and investment from abroad.

However, concerns were raised about the slow reform process in the legal and judicial sector, difficulties which arose despite progress in public expenditure management, the need to improve the business environment, as well as the negative impact of HIV/AIDS, which is already having an effect on the economy and on development in all sectors, and also affecting the number of government personnel in sectors such as education and the police.

Mozambique has yet to be significantly affected by the international financial crisis, but any future impact remains uncertain, particularly as the state budget is highly dependent on international assistance. As of December 2008, there has been no noticeable impact on the government’s current account in terms of reduced exports. Similarly, the financial crisis has yet to lead to any significant changes in the levels of external financing, whether from aid or from the flow of private capital. However, the impact of the crisis could materialise in the medium term, particularly through reduced levels of donor funding, if the global recession continues and deepens.

The EC is one of Mozambique’s key partners within a pluri-annual co-operation framework which allows for stability and the predictability of funds. The EC is the country’s largest partner in terms of public development support, and is one of the leading largest donors in terms of budget support to the government.