Mozambique In Post-Election Turmoil: Economic Policies That Could Make A Difference

(MENAFN- The Conversation) Turmoil following presidential and parliamentary elections in Mozambique has been severe . Preliminary official results from the 2024 elections indicated a landslide win by the ruling party, Frelimo. These results are widely contested, with various reports of irregularities .

Post-election squabbles are not new to the country. But this time feels different.

The current protests have been more sustained and widespread than ever before. A week-long paralysis of economic activity called by Venâncio Mondlane , one of the opposition presidential candidates, has received widespread support, especially in the capital city, Maputo.

Virtually all socioeconomic strata have participated, with up-market neighbourhoods adopting the panelaço , a coordinated banging of pots and pans, to show their discontent.

At times, protests have flared into violence and looting, leading to the temporary closure of the country's main land border with South Africa. For the first time, internet access has been curtailed .

But the unrest is not only about contested election results. It reflects widespread disenchantment with the status quo, including limited social mobility for many. For some scholars , the emergence of Islamic terrorism in the north of the country since 2017 is another symptom of growing inequalities and unfulfilled expectations from natural resource extraction, amid rapid population growth.

Despite calls for dialogue, including a citizen manifesto prepared by leading academics, a political compromise does not appear to be in sight. Regardless of what political settlement emerges, though, the new government faces stark economic policy challenges. These will only become more acute if instability and violence continue.

Drawing on a range of evidence and based on years of academic research in the country, I suggest that current political unrest reflects discontent with the socioeconomic status quo, including limited opportunities for advancement. To put Mozambique on a pathway to development and poverty reduction, I propose priorities and actions for a new government to consider.

The current crisis arose from various long-running economic and institutional challenges . Key among these is the“hidden-debt crisis” that came to light in 2014, involving billion-dollar commercial loans guaranteed by the government to set up a tuna fishing fleet. When these debts became known to the public, Mozambique saw a sharp contraction of official development assistance to the government, rapid exchange rate depreciation, and high consumer price inflation.

Research suggests these dynamics have contributed to substantial increases in poverty in the country. The government's recent National Development Strategy acknowledged that nearly two-thirds of the country's population of 30 million live below the national poverty line. This is up from just under 50% ten years ago.

But crises rarely have only one cause. Deeper issues include distortions due to organised crime and perceptions of elite capture . There is a widely held view that government contracts and mining concessions are tightly controlled to the benefit of political insiders. These insiders often act as gate-keepers to external private investors.

On top of this, the country has faced recurring shocks, such as COVID-19 and major climate events.

Management of public finances has added fuel to this smouldering fire. Long hoped-for windfalls from natural resource extraction, including coal and natural gas, remain distant .

Over the last decade, public investment has fallen dramatically and lending by local banks to the government has soared. Government spending has been squeezed as most tax revenues now go to pay public sector wages , service debts and maintain a bare minimum of public services.

The political legitimacy of the new government will turn on its ability to make genuine improvements within a reasonable time.

With severe resource constraints and only crude economic policy levers, careful reflection and debate is required to identify what to do first and how to deliver results.

In my view, five priorities should guide the economic policy focus of a new government:

• Strengthen macroeconomic stability through prudent public finances. Make fiscal space by managing the wage bill and internal debt.

• Establish a new social contract. Public expenditure must focus on critical public services, address regional inequalities and support the most vulnerable. The new government needs to inspire the younger generation that they can expect a better life than their parents.

• Undertake large-scale investments in economic infrastructure, to adapt to climate shocks and longer-run climate change. This will be critical to stimulate and sustain economic growth.

• Actively support (green) export sectors as drivers of growth and job creation, particularly in agriculture, where the majority of workers and the poor are found, as well as related agro-industries.

• Upskill the civil service, promoting professionalism, technical competence, non-partisanship, integrity, transparency and accountability.

Of course, setting priorities is the easier part. More difficult is to identify feasible means to achieve them. I put forward some ideas for immediate concrete actions:

• Place a temporary freeze on government salary expenditures and acquisition of non-critical new equipment.

• Smartly repackage public debt, if necessary through renegotiation with major creditors.

• Set out a clear pathway towards a more competitive real exchange rate. This should recognise that moderate and managed inflation can reduce the real cost of government wages and certain debt obligations. And that a more competitive and stable exchange rate should boost export sectors.

• Reform and expand social protection programmes. This needs to be done urgently. The aim would be to get money flowing through the wider economy (especially beyond urban centres) and to support the most vulnerable. The country's largest social protection scheme, a social pension for the elderly, has made virtually no transfers since 2023 .

• Try offering smallholder farmers a minimum price for selected agricultural products, to promote income stability and stimulate agricultural value-chains.

• Base policy on high-quality evidence and deliberation.

Lastly, the government should consider measures to raise additional resources for investment and social protection. These could include:

• Making the case for fast-track access to global funds for climate adaptation and mitigation . This requires upfront investment in diplomacy, technical expertise and project development across government.

• Reclaiming a share of ill-gotten assets. This could be done, for example, by reconciliation agreements . At a minimum, public registers of assets held by politically exposed persons, whether at home or abroad, should be established.

This is an ambitious agenda, but there are no simple fixes. The incoming government must not ignore the gravity of the economic challenges facing the country. And it would be unwise to adopt purely ideological, populist or untested reforms.

Placing Mozambique on a path that provides younger generations with opportunities for social mobility is essential.

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