The 2004 Constitution provides for a multi-party system, protection of basic human rights and a free market economy. Both the 250-member parliament and the president are directly elected every five years. The last presidential and parliamentary elections were held in December 2004. The parliament has a 5% electoral threshold. The President, who is constitutionally eligible for re-election once, appoints the Prime Minister and the Council of Ministers.
A further step in Mozambique's democratic development was taken in December 2004, when presidential and parliamentary elections took place for the third time since the Rome Peace Accords (1992). The main participating parties were the ruling party Frelimo and the opposition party Renamo. In the elections, Frelimo candidate Armando Guebuza was elected to succeed President Joaquim Chissano, making him Mozambique's first new head of state in 18 years. For the first time in Mozambique, a new president took office in a time of peace and on the basis of the results of elections. The first Frelimo President Mondlane was murdered and President Machel died in a plane crash, almost certainly due to sabotage. Retiring President Joachim Chissano had been in power since 1986, first as president during the time of the one-party state and later twice as elected president. Although President Chissano had the legal possibility to run for a third term as president, he refrained from doing so, partly due to pressure from his Frelimo party. In an African context, this can be called unusual.
In view of the history and importance of the elections for the young democracy, as well as the real commitment to development and good governance in Mozambique, several international observers were present at the presidential and parliamentary elections, including the EU Election Observation Mission (EOM), the Carter Centre, the Electoral Institute for Southern Africa (EISA), the SADC Parliamentary Forum, the AU, and the Community for Portuguese Speaking Countries (CPLP). The EU EOM and the Carter Centre were by far the largest missions.
Regarding the policies of the new government, President Guebuza indicated that he demands greater commitment from all ministries and officials in the fight against poverty and he stressed the need to fight bureaucracy and corruption. The general impression of the new government is that it is reasonably decisive and that the balance is positive. On the other hand, there is also a lot of impatience, and people want to see immediate improvements in their personal situation and not in "statistics".
The Government's top priority is poverty reduction, with a much stronger emphasis than before on the district level. The Government is prepared to take further steps in decentralisation and to delegate more power and resources to the districts. Maintaining solid economic growth is an absolute condition for a successful poverty reduction policy, and the new PARPA, Mozambique's PRSP, gives this higher priority. In line with this, the new government also pays a lot of attention to vocational education, which should eventually contribute to the improvement of employment and to a better competitive position. The government's reform agenda also includes a large number of issues aimed at improving the investment climate and attention to the need to improve financial services, especially in rural areas. The government is clearly moving in a more nationalistic direction than the previous administration and is taking a stronger lead in policy processes, including donor engagement. On the other hand, after one year of Guebuza, relatively little progress has been made in reforming the public sector and improving the functioning of the legal system. For the current political situation see chapter history.
The fact that Mozambique has become one of the poorest of the least developed countries in the world is due to a mixture of factors such as the shock of decolonisation (almost the entire Portuguese middle management suddenly left the country), the disruption in the region by the international boycott and the convulsions of the apartheid regimes in South Africa and Rhodesia (now Zimbabwe) as well as the long civil war. Since 1992, the economy has been coming out of the doldrums and economic growth has been almost unparalleled in the world (although partly determined by the extremely low starting level). Factors underlying this favourable trend are political stability, economic reforms and the high level of donor support. Economic growth in 2017 was 3.7%. While the per capita GDP of about $1,300 (2017) is still among the lowest in the world, it is much higher than in the mid-1990s. Other economic indicators also suggest that a sustained economic recovery is underway.
Inflation was brought down substantially in recent years, to around 4% in 2013, but in 2017 it rose again to 15.3%. Fiscal policy aims to reduce the budget deficit, by cutting expenditure and increasing tax revenue.
The confidence of foreign private investors in Mozambique is strongly increasing. Recent developments regarding large investment projects such as the rehabilitation of the transport corridors from the 'hinterland' of South Africa, Zimbabwe and Malawi to the respective seaports of Maputo, Beira and Nacala; the construction of an aluminium smelter (MOZAL), the exploitation of gas fields and the construction of a pipeline by the South African company SASOL and the negotiations about two large steel factories (in Maputo and Beira) are encouraging signs in this respect. Mozambique also has a stock of natural resources, including coal, hydro-energy, gas and possibly oil, for which there is great interest from foreign investors.
For the time being, however, agriculture is and will remain by far the most important source of income and employment. Over a quarter of domestic production comes from agriculture; about 75% of the population lives from agriculture. Together with fisheries, it is also the main source of export earnings.
As part of the economic liberalisation and restructuring process, a large part of state-owned enterprises and banks were privatised and prices liberalised. The results have been impressive and the country has been cited as an IMF success story, although it is encountering problems in the current phase of complicated financial reforms. The national budget is largely financed by foreign donors. Efforts are being made to increase tax collection capacity. Another bottleneck is the inadequate infrastructure, which hampers the market-oriented exploitation and marketing of agricultural products. Further development of transport routes is also indispensable for Mozambique as a distribution country in the region.
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