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Updated Jun 16, 2020
A Mozambican woman walks in Palma, on February 16, 2017. The small, palm-fringed fishing town of Palma was meant to become a symbol of Mozambique's glittering future, transformed by one of the world's largest liquefied natural gas projects, but it is now under threat from construction delays, fallen gas prices and a huge government debt scandal. JOHN WESSELS / AFP
The small, palm-fringed fishing town of Palma was meant to become a symbol of Mozambique’s glittering future, transformed by one of the world’s largest liquefied natural gas projects, but it is now under threat from construction delays, fallen gas prices and a huge government debt scandal. (John Wessels/AFP)

The most recent report from Mozambique’s National Statistics Institute (INE) reveals the nation’s economy has flipped from a consistent inflationary trend toward a 0.6 percent deflationary one. Drawing on data from consumer price fluctuations in Mozambique’s three largest cities—Maputo, Nampula, and Beira—the INE’s research suggests this recent bout of deflation stems from the sudden drop in prices for private education, a first in the country’s history. Due to the government-mandated closure of all schools to mitigate the spread of COVID-19, private education facilities either lowered their fees or were unable to collect tuition from parents.

 

The informal economy has come to a near complete standstill

 

The Center for Democracy and Development (CDD), a civil society organization, warned that the INE’s deflation numbers are “misleading.” Typically, deflation arises when demand for goods is at a lower rate than its supply, forcing vendors to lower prices in an effort to raise demand. In a Facebook post, the CDD argues “that this deflation is not the result of an excess supply of products on the market, but from the shortage of demand as a result of the deterioration of the purchasing power of families, especially those of low income.” The Center urges the Mozambican government to prioritize support for low-income families who are most at risk of economic ruin from the pandemic.

All border posts are closed save for one shared with South Africa, which is open for cargo purposes only, and the informal economy has come to a near complete standstill. Whatever little benefit consumers would normally have gained during a deflationary period is cancelled out by the broader economic precarity of the country and its most vulnerable communities.

 

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