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In the first half of the second millennium A.D., northern Mozambican port towns were frequented by traders from Somalia, Ethiopia, Egypt, Arabia, Persia, and India. The Portuguese were able to wrest much of the coastal trade from Arab Muslims in the centuries after 1500 and to set up their own colonies. Portugal did not relinquish Mozambique until 1975. Large-scale emigration, economic dependence on South Africa, a severe drought, and a prolonged civil war hindered the country's development until the mid-1990s. The ruling Front for the Liberation of Mozambique (FRELIMO) party formally abandoned Marxism in 1989, and a new constitution the following year provided for multiparty elections and a free market economy. A UN-negotiated peace agreement between FRELIMO and rebel Mozambique National Resistance (RENAMO) forces ended the fighting in 1992. In 2004, Mozambique underwent a delicate transition as Joaquim CHISSANO stepped down after 18 years in office. His elected successor, Armando GUEBUZA, served two terms and then passed executive power to Filipe NYUSI in 2015. RENAMO’s residual armed forces intermittently engaged in a low-level insurgency after 2012, but a late December 2016 ceasefire eventually led to the two sides signing a comprehensive peace deal in August 2019. Elections in October 2019, challenged by Western observers and civil society as being problematic, resulted in resounding wins for NYUSI and FRELIMO across the country. Since October 2017, violent extremists - who an official ISIS media outlet recognized as ISIS's network in Mozambique for the first time in June 2019 - have been conducting attacks against civilians and security services in the northern province of Cabo Delgado.

Mozambique is a poor, sparsely populated country with high fertility and mortality rates and a rapidly growing youthful population – 45% of the population is younger than 15. Mozambique’s high poverty rate is sustained by natural disasters, disease, high population growth, low agricultural productivity, and the unequal distribution of wealth. The country’s birth rate is among the world’s highest, averaging around more than 5 children per woman (and higher in rural areas) for at least the last three decades. The sustained high level of fertility reflects gender inequality, low contraceptive use, early marriages and childbearing, and a lack of education, particularly among women. The high population growth rate is somewhat restrained by the country’s high HIV/AIDS and overall mortality rates. Mozambique ranks among the worst in the world for HIV/AIDS prevalence, HIV/AIDS deaths, and life expectancy at birth.

Mozambique is predominantly a country of emigration, but internal, rural-urban migration has begun to grow. Mozambicans, primarily from the country’s southern region, have been migrating to South Africa for work for more than a century. Additionally, approximately 1.7 million Mozambicans fled to Malawi, South Africa, and other neighboring countries between 1979 and 1992 to escape from civil war. Labor migrants have usually been men from rural areas whose crops have failed or who are unemployed and have headed to South Africa to work as miners; multiple generations of the same family often become miners. Since the abolition of apartheid in South Africa in 1991, other job opportunities have opened to Mozambicans, including in the informal and manufacturing sectors, but mining remains their main source of employment.

At independence in 1975, Mozambique was one of the world's poorest countries. Socialist policies, economic mismanagement, and a brutal civil war from 1977 to 1992 further impoverished the country. 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, propelled the country’s GDP, in purchasing power parity terms, from $4 billion in 1993 to about $37 billion in 2017. 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, about half the population remains below the poverty line and subsistence agriculture continues to employ the vast majority of the country's work force.

Mozambique's once substantial foreign debt was reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives. However, in 2016, information surfaced revealing that the Mozambican Government was responsible for over $2 billion in government-backed loans secured between 2012-14 by state-owned defense and security companies without parliamentary approval or national budget inclusion; this prompted the IMF and international donors to halt direct budget support to the Government of Mozambique. An international audit was performed on Mozambique’s debt in 2016-17, but debt restructuring and resumption of donor support have yet to occur.

Mozambique grew at an average annual rate of 6%-8% in the decade leading up to 2015, one of Africa's strongest performances, but the sizable external debt burden, donor withdrawal, elevated inflation, and currency depreciation contributed to slower growth in 2016-17.

Two major International consortiums, led by American companies ExxonMobil and Anadarko, are seeking approval to develop massive natural gas deposits off the coast of Cabo Delgado province, in what has the potential to become the largest infrastructure project in Africa. . The government predicts sales of liquefied natural gas from these projects could generate several billion dollars in revenues annually sometime after 2022.

South Africa has placed military units to assist police operations along the border of Lesotho, Zimbabwe, and Mozambique to control smuggling, poaching, and illegal migration