Country profile

From the beginning of the liberation war in 1964, Mozambique experienced nearly 30 years of violent strife, social and political disruption, and economic crisis. Under pressure of civil war, the infrastructure of governance disintegrated. In large parts of rural Mozambique, schools and health posts were destroyed and teachers and nurses evacuated. The signature of the 1992 General Peace Accord, brought along a period of almost uninterrupted growth of around 8 percent per annum, making Mozambique one of Africa’s most successful stories of post war reconstruction and economic reform. The country experienced its third peaceful and democratic general elections in December 2004, proving political stability and national reconciliation.

The proportion of people living below the national poverty line in Mozambique has significantly declined from 69.4 percent in 1997 to 54.1 percent in 2003[1]; and there have been significant advances in relation to key indicators of human and social development, with a substantial decrease in the areas of child and maternal mortality and an increase in net enrolment rates.

Despite these achievements, the country is still one of the poorest countries in the world; with a Human Development Index (HDI) rank of 172 out of 177 countries. More than half of the population relies on the informal rural economy and income inequality is high[2]. Real GDP per capita (PPP Dollars) is US$ 2,088 (2006); life expectancy at 47.4 years is among the lowest in Africa, partly due to the impact of HIV and AIDS - about 16.2 per cent in 2004 (Mozambique MDGR2005). Mozambique remains one of the least developed countries in the region concerning road networks with a road density of less than 0.2 km/m² and 0.86 km per capita.

Political situation

The results of the 2004 General elections were accepted by the opposition, making it possible to anticipate political stability. These however strengthened further the main political party, which brought alterations in governmental management. In its first mandate year, the Government replaced numerous highly established public service entities as well as public enterprise managers. Tight measures were taken to improve government’s service delivery as well as efficiency. 2005 witnessed adoption of legislative measures and regulations aiming to put an end to illegal practices.

The 2008 municipal elections as well as the 2009 Presidential, Legislative, and Provincial Assembly elections were undertaken in a calm and peaceful manner. The result has been the majority of Frelimo, while some members of the major opposition (Renamo) continues to boycott the participation in the National Assembly.

Selected challenges

Mozambique’s geographical location makes it prone to natural disasters such as severe droughts and floods. As with other South African countries, Mozambique is affected by global climate change altering rainfall patterns. In the first quarter of 2000 floods hit the southern and central Mozambique as heavy rains caused rivers banks to burst. Apart from an estimated 700 deaths, over 1m people were displaced and economic and social activities were seriously disrupted. Homes, factories and critical infrastructure were damaged or destroyed, constituting a major setback for the country and underlining it’s vulnerable to climatic shocks.

The country also suffers from the onslaught of the HIV and AIDS epidemic. The infection rate amongst the sexually active population (15-49 years old) has steadily increased over the years, from 8.2 per cent in 1998 to 16.2 per cent in 2004. Without a more aggressive response to the spread of the infection, life expectancy is projected to drastically in the near future (to about 36 years by 2010). The gender difference is particularly acute, 58% of the population living with AIDS are women, and among the age groups 15- 24 years, prevalence among women is three times higher than that of men.

The major obstacles to private sector development are the cost of financing (financing institutions almost inexistent in rural areas), red tape and infrastructure. Governance issues like, corruption, anti competitive practices, regulatory uncertainty and crime. On the financial side, the commercial banking sector dominates the financial system, accounting for more than 90 percent of the systems total assets; and almost all commercial banks in Mozambique are majority foreign-owned.

National response to the challenges

Mozambique is fully committed to the fight against poverty. The Government has adopted a number of well-articulated plans for poverty reduction and growth. These include Agenda 2025 (the national long term vision), which is the basis for the Five Year Programme (2005-2009) and the second generation of Action Plan for the Reduction of Absolute Poverty, PARPA (PRSP II for the period 2006-2009, which was then extended to 2010). The PARPA II is based on the 2005-2009 government five-year programme, and it has integrated the Millennium Declaration principles and the MDGs into its objectives. It clearly defines its strategy of economic growth and poverty reduction through three pillars: governance, human capital, and economic development.

Development Assistance and Coordination

International development assistance plays a crucial role in Mozambique’s fight against poverty. The country’s known reputation in various angles has made it a major destiny of Official Development Assistance (ODA).

Development partners have engaged in an ongoing and highly participatory dialogue in the context of PARPA. A group of 19 donors, known as ‘G-19’, currently provide budget support to Mozambique. The rationale for direct budget support to Mozambique is to provide efficient and effective financial support to the implementation of the PARPA. Government and the G19 have signed a Memorandum of Understanding (MoU) in 2004 and then in 2009, which sets out the principles, terms and operations for the Programme Aid Partnership (PAP). This is one of the largest joint programmes in Africa, both in terms of volume and donor agencies involved. It is premised on support for poverty eradication by: (a) Building a partnership based on frank and open dialogue on the content and progress of Mozambique’s poverty reduction strategy; and (b) Providing financing for poverty reduction, clearly and transparently linked to performance, in a way which improves aid effectiveness and country ownership of the development process, reduces transaction costs, allows allocate efficiency in public spending, predictability of aid flows, increases the effectiveness of the state and public administration, improves monitoring and evaluation and strengthens domestic accountability.

Debt relief and the HIPC initiative

Since 1996, Mozambique has gone through two rounds of debt relief under the HIPIC initiative, bringing its debt-to-exports ration down from 70 percent in 1997 to 131 percent in 2001. This level is regarded as sustainable by the IMF and the World Bank. The country’s development plans in the immediate post independence year involved running up substantial foreign debt. When war and draught led to serious growth deterioration in the mid-1980s the debt load became unsustainable. The war also led to a high military debt to the Soviet Union.

By 1998, Mozambique’s total foreign debt, even after repeated rescheduling and write-offs by various bilateral creditors stood at 5.5 billion in normal terms. Complex negotiations eventually resulted in the WB and the IMF declaring in April 1998 that Mozambique was eligible for debt relief under the HIPC initiative. In June 1999, some US$ 1.7 billion of Mozambique’s debt was waived. After the floods, several creditors – including the US, UK, Finland, Spain and Portugal – agreed to suspend all or part of the debt payments to Mozambique.

II. Key Documents

1. PAP-related documents such as MoU for budget support is available at: www.pap.org.mz
2. Draft documents (under preparation)

• Draft Policy on International Cooperation
• Draft Code of Conduct on Aid Effectiveness

[1] The 2002/03 Household survey Inquérito Nacional aos Agregados Familiares (IAF 2002/03)

[2] Government estimates show that inequality increased – the Gini coefficient increased from 0.44 in 1997 to 0.52 in 2003 – and the consumption of the poor grew slower, in percentage terms, than the one of the rich.