Mozambique Runs Out Of Dollars

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Today I was reading various reports on the FOREX shortages in Mozambique and how this is impacting the economy. I kind of chuckled to myself thinking this could be down to the country no longer getting the bail outs from USAID so I posted the question to AI Overview on Google. Sure enough it was at the top of the list of reasons why there is a FOREX shortage and you could not make this stuff up. Who would have guessed that the stopping of USAID would be this catastrophic and all to obvious if you live in Africa.

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How much USAID did the Mozambican government rely on that by not receiving any aid would cause such an economic calamity? In 2024 the country received a reported $586 million which was roughly $280 million less than was expected due to USAID being stopped. In 2023 Mozambique was given $664.1 million with the bulk of the aid being economic support. Some goes to health, but the majority is given to help the country economically. Not quite sure what that entails because economically could literally mean just a gift to keep the country afloat.

The GDP of Mozambique is roughly $22 billion per year so the USAID was the equivalent of around 4% which is a big number when putting this into context. Ukraine received a reported $16.6 billion and Mozambique was the second highest recipient of USAID funding. Angola was third on the list with $71 million roughly 9 x less than what Mozambique was being paid.

If a country relies on Foreign Aid for "economic" reasons and does not receive their annual gift then I guess the economy will go pear shaped at some point and this is what we are seeing now.

The only reason I heard about Mozambique and the FOREX shortages is than a local South African airline is having trouble being paid and is owed over $200 million in FOREX for ticket prices. The country literally has no dollars to pay the bills and a shrinking GDP of nearly 2% last year is not helping matters.

The aluminum smelter Mozal which is the largest in the country shuts down in March this year due to not being able to negotiate cheaper electricity tariffs. Mozal as a company represents roughly 30% of Mozambique's exports so the GDP and FOREX derived from these exports is only going to deteriorate further. The roughly negative 2$ GDP growth is going to be far worse if Mozal shuts down as not just for less FOREX, but local communities depend on the work the smelter offers not only the jobs, but the products being used creating other jobs.

When a country runs out of FOREX the implications are very severe as all imports grind to a halt which includes essential raw materials like fuel, spare parts.

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These were the headlines of an article published on the 23rd October last year so either the article was absolute nonsense or someone pinched all the funds. It would be impossible to go from such a record FOREX high 2 months ago to having no funds so I guess it was an article to buy the country time trying to keep confidence going longer. Roughly at the same time this article was written the banks in South Africa were warning about delayed payments from Mozambique due to FOREX shortages.

Posted Using INLEO