Mozambique Launches Local Economic Development Fund with Significant Budget Allocation
The Mozambican government has allocated 1.5 billion meticais (approximately 23 million US dollars, based on the current exchange rate) from the State Budget for 2026 to the Local Economic Development Fund (FDEL). This initiative aims to support local economic growth and development across the country.
During a speech at the Mozambican parliament, the Assembly of the Republic, Minister of Planning and Development Salim Vala emphasized that this funding will be supplemented by resources mobilized through partnerships being established. The goal, as stated by Vala, is to ensure that by 2027, the FDEL becomes a robust, inclusive, equitable, and transparent decentralized financing initiative with an effective presence in all districts and municipalities.
President Daniel Chapo officially launched the FDEL in July. According to Vala, during the 2025 financial year, 824.6 million meticais were allocated under the fund to 145 districts and 65 municipalities. Of this amount, 17.6 percent was directed to the most populous province, Nampula, while 10.47 percent went to Zambezia, the second most populous province.
By 3 November, Vala reported that 112,197 draft projects had been submitted to the fund. The total amount requested exceeded ten billion meticais, which is more than twelve times the available funds.
Vala noted that 67 percent of the proposals came from individuals, 32 percent from associations and cooperatives, and one percent from micro and small companies. He highlighted that the high level of interest demonstrated that “the FDEL message has reached the grass roots, awakening the entrepreneurial energy of citizens.” This, he claimed, represents “an authentic mass movement oriented towards financial inclusion and citizenship.”
The Fund, according to Vala, provides citizens who are unable to obtain credit from banks with a real opportunity to implement their business projects. However, Vala stressed that the FDEL will provide loans, not grants.
Despite this promise, past experiences raise concerns. The FDEL is essentially a re-edition of an initiative introduced by former President Armando Guebuza at the start of this century. Under that scheme, each district received seven million meticais annually from the state budget. The money was intended to be lent to citizens with viable business proposals that could create jobs or boost food production. The funds were to be repaid, allowing the “seven million” to function as a revolving fund, replenished by repayments made by initial beneficiaries.
However, in practice, the majority of beneficiaries did not repay their loans. No legal action was taken, and no audits were conducted. It remains unclear whether any of the projects funded by the “seven million” are still operational.
The current government is determined to avoid repeating this failure. Vala stated that each beneficiary of the FDEL is expected to repay the loan received, ensuring that the resources return to the Fund and are reinvested in new projects. Rotating funds, he added, guarantee that public funds circulate within communities and continue to generate business opportunities.
Vala also promised that decentralised audits would be conducted alongside “performance assessment mechanisms.” He expressed hope that the FDEL “will cease to be just an instrument of public expenditure, and will become a socially productive investment fund.”
Key Details About the FDEL
- Budget Allocation: 1.5 billion meticais (about 23 million US dollars) for 2026.
- Objective: To establish a decentralized financing initiative by 2027.
- Past Initiative: A similar program under President Armando Guebuza faced issues with non-repayment of loans.
- Current Approach: Emphasis on loans rather than grants, with repayment required to sustain the fund.
- Audits and Assessments: Plans for decentralised audits and performance evaluation mechanisms.
- Community Impact: Focus on generating business opportunities and promoting financial inclusion.