Economy of Mozambique

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The economy of Mozambique has developed since the end of the Mozambican Civil War (1977–1992), but the country is still one of the world's poorest and most underdeveloped. Civil war opposing RENAMO to FRELIMO, ineffective socialist economic policies, government mismanagement, and severe droughts plagued Mozambique's economy throughout the 1980s, leaving it heavily dependent on external assistance. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize 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 country'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 revenue 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 population remains below the poverty line. Subsistence agriculture continues to employ the vast majority of the country's workforce. A substantial trade imbalance persists although the opening of the MOZAL aluminium smelter, the country's largest foreign investment project to date has increased export earnings. Additional investment projects in titanium extraction and processing and garment manufacturing should further close the import/export gap. Mozambique's once substantial 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.

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