Last updated March 2008 Mozambique has been a strong economic and social performer in Africa. (For information on the government, political process, and economic data, please see Country Background section below.) Since the devastating civil war ended in 1992, the country has enjoyed a remarkable recovery, achieving an average annual rate of economic growth of 8 percent between 1996 and 2006. As a result, the poverty headcount index fell by 15 percentage points between 1997 and 2003, bringing almost 3 million people out of extreme poverty (out of a total population of 20 million). From the human development perspective, this has meant a 35 percent decrease in infant and under-five mortality, and a 65 percent increase in net primary school enrollment. Inequality remained relatively low by regional standards, and progress has been made toward the key Millennium Development Goals of infant mortality and primary enrolment. (To access more data on Mozambique, please visit the World Development Indicators 2007). Sustaining this impressive performance requires further investments and reforms to improve the business environment, make the legal and judicial sector more effective, strengthen public financial management and the overall governance framework, and further decentralize and bolster the delivery of key services, especially in rural areas. Reducing the high HIV/AIDS infection rate, at 16 percent, is also critical. World Bank Group Partnership Strategy The World Bank Group (WBG) is actively supporting Mozambique in meeting its development challenges. Since it began operations in Mozambique in 1984, World Bank assistance has evolved from helping to stabilize the economy in the 1980s to post-war reconstruction in the early 1990s, to a comprehensive support strategy in the late 1990s, to the current strategy that involves close collaboration with the Government, development partners and civil society. The World Bank Group’s commitment to Mozambique’s development effort is significant. Over four years to the end of 2007, US$2.5 billion has been transferred to Mozambique (including IDA disbursements, IFC activities, trust funds and IDA debt relief), and US$331 million in guarantees has been issued by MIGA and IBRD. An additional US$1.1 billion has been facilitated through the World Bank in the form of non-IDA debt relief.
The World Bank Group Country Partnership Strategy for 2007-2011 sets forth priorities and activities to support Mozambique’s efforts to reduce poverty and promote sustainable economic growth. The strategy is timed to be aligned with the Government’s second poverty reduction support strategy ( Planode Acção para a Redução da Pobreza Absoluta II or “PARPA II”), and will be guided by three overarching principles: - Increased accountability and public voice
- Equitable access to key services
- Sustainable and broad-based growth
The strategy also seeks to address cross-cutting issues such as HIV/AIDS, private sector development, and capacity and institutional strengthening. To respond to Mozambique’s evolving development needs, the strategy offers a suite of World Bank Group products, including International Development Association (IDA) non-lending and lending; International Finance Corporation (IFC) support for private sector investment; Multilateral Investment Guarantee Agency (MIGA) political risk guarantees for foreign investment; International Bank for Reconstruction and Development(IBRD) partial risk guarantees; and access to trust funds managed by the World Bank such as the Global Environmental Facility, Carbon Fund, Water and Sanitation Program, Public-Private Infrastructure Advisory Facility, and Africa Catalytic Growth Fund. The World Bank Group’s 2007-11 strategy was developed through consultation with the Government, development partners and civil society, and is in line with the emphasis of the Bank’s Africa Action Plan: strengthening global development partnerships; building capable states; and supporting results frameworks. The World Bank works in close collaboration with the International Monetary Fund on the macroeconomic program for its assistance to Mozambique and the G19 group of partners providing general budget support. IDA Lending Activities IDA lending activities support government development projects through concessional credits (no-interest loans). Sixty-four IDA credits and grants have been approved for Mozambique since 1985, with a total value of US$ 3,427 million. There are presently (as of April 2008) 17 ongoing IDA-funded projects, 4 Global Environment Facility (GEF) projects, and 2 regional projects representing US$919 million of committed funds, of which US$174 million are grants. 
Recently approved projects include: a US$ 15 million credit by the International Development Association (IDA) in support of the Water Services and Institutional Support Project, and a grant of US$ 15 million by the Africa Catalytic Growth Fund (ACGF) for the same project. A US$ 15 million additional IDA funding for the Higher Education Project. A US$ 45 million credit for a Mozambique-Malawi Interconnection Project, the second phase of the Southern Africa Power Market Program. A US$ 6.2 million grant by the Global Environmental Facility (GEF) for the Market-led Smallholder Development in the Zambezi Valley. And, a US$60 million credit for General Budget Support. IDA Non-Lending Activities IDA non-lending activities include technical assistance and studies, which are prepared in collaboration with the Government, development partners and other stakeholders, and are disseminated once completed. The financing for these studies come from IDA’s administrative budget, often complemented by support from other development partners. The World Bank Institute (WBI), one of the knowledge services of the World Bank Group, engages in training and distance-learning activities in Mozambique, one of its several focus countries. Numerous studies were concluded during the 2005-07 period, spanning topics such as Value Chain Analysis; Poverty, Social and Gender Assessment; Labor Law Reform; Horticulture Development; Education Fee Reform Impact Analysis; and a National Water Resource Strategy. In addition to country-specific activities, the World Bank offers a range of regional and global knowledge products relevant to Mozambique. These include the Doing Business annual survey and report that provides information on comparable measures of business regulation and enforcement in 175 economies; the Africa Development Indicators report that provides macroeconomic, sectoral and social indicators of 53 countries. IDA Support for Debt Relief Mozambique has benefited from debt cancellation under the Highly Indebted Poor Country (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI). Resources available as a result of debt relief are being allocated to anti-poverty programs contained in the PARPA. Debt relief from the World Bank to Mozambique between 1999 and 2007 under HIPC and MDRI amounts to US$2.8 billion (US$0.9 billion from HIPC and US$1.9 billion from MRDI). Mozambique has also received support from two World Bank commercial debt buy-back operations (totaling US$300 million of debt relief) and debt relief beyond HIPC from bilateral donors. MDRI is an extension and a deepening of HIPC. Eligibility criteria for MDRI included: satisfactory macro-economic performance under the IMF Poverty Reduction and Growth Facility Program; progress in implementing a poverty reduction strategy; and a public expenditure management mechanism that meets minimum standards for governance and transparency. For more on the World Bank and IMF HIPC initiative, as well as the MDRI, please visit: Heavily Indebted Poor Country (HIPC). IFC Program The International Finance Corporation’s (IFC) current portfolio (as of fiscal year 2007) totals US$113 million, consisting of eight projects in finance, agribusiness, primary metals production, oil and gas, and general manufacturing, including four operations in the small- and medium-sized enterprise (SME) sector. The IFC’s main investments have been in the Mozal aluminum smelter near Maputo, and the Mozambique-South Africa gas pipeline. The IFC also provides investment and technical assistance support to SMEs through the Mozambique SME Initiative Program. In addition for fiscal year 2007, the IFC is considering investment projects with a potential total value of US$15 million, and its SME program is analyzing potential projects for direct investment and technical assistance. The Private Enterprise Partnership for Africa (PEP Africa), an IFC technical assistance arm, launched several key initiatives during 2006-07. The IFC’s focus in Mozambique is on three industries: tourism, mining and energy, and financial services. This support encompasses the cross-cutting issues of: - Mobilization of both local and foreign direct investment to key sectors of the economy;
- Strengthening of private sector access to finance;
- Developing infrastructure;
- Improving the investment climate;
- Increasing linkages between large investments and the local economy;
- Increasing private sector awareness of HIV/AIDS issues
Over the 2007-11 periods, IFC will seek to: - Create dedicated lines of credit to local financial institutions to increase their trade finance and SME-lending functions;
- Assist the Government in creating a privately-managed credit bureau;
- Assist the Government in its efforts to improve the investment climate;
- Provide direct investments and technical assistance to local financial institutions;
- Implement the Mozambique Tourism Anchor Investment Program, a collaboration with the Ministry of Tourism that aims to identify, develop and promote three Anchor Investment Sites and to mobilize funds for infrastructure development, both to improve the country’s image as a tourism and investment destination;
- Expand the Mozlink Program, to further increase the linkage of large investments to local SMEs;
- Expand the SME Enterprise Development Initiative that provides support for feasibility studies to increase potential access to finance and to strengthen local business associations;
- Continue support to large corporate investments, especially early on in order to promote greater development impact; to SMEs; and to programs that increase corporate sector awareness of HIV/AIDS issues
MIGA Program Mozambique is MIGA's fourth-largest host country and represents the agency's largest exposure in Africa. The portfolio consists of 7 guarantees totaling US$271 million in gross exposure. The Mozambique portfolio is well-diversified. It consists of eight projects supporting agribusiness, infrastructure, manufacturing, mining, oil and gas, services and tourism. Recently, MIGA submitted the final report on its four-year Swiss Partnership program, which worked with investment promotion intermediaries in Mozambique, as well as in Ghana, Senegal and Tanzania. Under the initiative, MIGA assisted Mozambique to identify opportunities to integrate better into the international economy, and facilitated securing an investment of US$1.5 million to help finance the Belulane Free Zone and Industrial Park. MIGA cooperated with IDA in relation to the recently closed IDA-funded Enterprise Development Project (PoDE) by providing assistance to the Investment Promotion Center. MIGA is working on several applications for guarantee coverage of investments. MIGA’s newest program in Mozambique is a small Investment Guarantee Program for investments of less than US$5 million. For more information on World Bank assistance to Mozambique, including lending breakdown and project reports, see: Country Background The Government Mozambique gained independence from Portugal in 1975. A long period of civil war ended with a UN-backed peace accord in Rome in 1992, between the ruling party FRELIMO and RENAMO. A new constitution approved in 1990 established a multiparty system. After three peaceful general elections and a presidential transition, the country is now considered to be politically stable. Politics and Elections Main Political parties: Front for the Liberation of Mozambique (FRELIMO); Mozambican National Resistance (RENAMO); numerous small parties. To date, the country has had three presidential and parliamentary elections (1994, 1999, 2004); two municipal elections (1998, 2003), and is set to organize its first provincial legislative elections in 2009 as well as Municipal elections in the same year. The next presidential and parliamentary elections are planned for 2009. The suffrage is universal at 18 years of age. FRELIMO also won majorities in the national assembly with 129 seats against 112 for RENAMO in 1994, and 133 seats in the 1999 elections. The total number of seats in the national assembly is 250. In December 2004, Armando Guebuza, the FRELIMO candidate, won with 64% of the votes, more than twice as many as RENAMO candidate Afonso Dhlakama (32%). In the parliamentary elections, FRELIMO won 62% (1.8 million) of the votes, RENAMO 30% (905,000 votes) and 18 minor parties shared the remainder. FRELIMO now holds 160 of the parliamentary seats and RENAMO holds 90. The first municipal elections were boycotted by RENAMO, the largest opposition party. The second municipal elections in 2003 involved 33 municipalities with some 2.4 million registered voters. This was the first time that FRELIMO, RENAMO, and independent parties competed without significant boycotts. These local elections registered a 24% turnout compared to 15% for the first municipal elections. RENAMO won 5 mayoral positions, including that of the second largest city, Beira. FRELIMO won 28 mayoral positions country-wide. The country approved recently a new electoral law. Economic Data and Development Progress and Challenges Annual economic (GDP) growth rate 8.5% (2006)
GDP (2006): US$ 7.7 billion Per capita gross domestic product (2006): US$ 350
Natural resources: Hydroelectric power, coal, natural gas, titanium ore, tantalite, graphite, iron ore, semi-precious stones, and arable land
Agriculture (22% of GDP); Industry (29% of GDP); Services (49% of GDP) Trade Imports fob (2006): US$ 2.88 billion; Exports (2006) US$ 2.39 billion. Export commodities--aluminum, cashews, prawns, cotton, sugar, citrus, timber, bulk electricity, natural gas. Main markets : Belgium, South Africa, Zimbabwe. Source: Government of Mozambique, WB and IMF estimates. |
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