Mozambique - From post-conflict recovery to high growth

91602 IDA at Work Mozambique: From Post-Conflict Recovery to High Growth M ozambique has emerged from decades of war to become one of Africa’s best-performing economies. One of the poorest countries in the world at independence, the country has enjoyed a remarkable recovery, achieving an average annual rate of economic growth of 8 percent between 1996 and 2008, the highest growth rate among African oil-importers. This resulted in more than three million people being lifted out of poverty. Assuming that the poverty reduction trend between 1997 and 2003 continues Mozambique would be on-track to halve the population living in absolute poverty by 2015. Challenge Sustaining the country’s impressive performance of the last decade will require further investments to expand the country’s infrastructure networks, including in roads, railways, energy, water, and ports; improve the business environment, including reducing red-tape; making land and labor legislation more flexible; making the legal and judicial sector more effective; strengthening public financial management and the overall governance framework; and further decentralizing and bolstering the delivery of key services, especially in rural areas. Reducing the high HIV/AIDS infection rate—currently at 15 percent—is also critical. Approach Mines. The recent IDA co-financed Mineral Resources Project helped the government IDA support to Mozambique has been diversi- develop new mining legislation, revamp and fied and continuous over the years. Since update geological surveys, and create a new it began operating in  Mozambique in 1984, cadastre system. This has laid the foundation IDA’s assistance has evolved from helping to for a strong minerals development sector. stabilize the economy in the 1980s, to post- For instance, the new mining cadastre has war reconstruction in the early 1990s, to a contributed to the processing of over 1,000 comprehensive support strategy in the late licenses to date, and contributed to the over- 1990s, to the current strategy that involves all soar in foreign direct investment flows to close collaboration with the government, the mining sector in the country today. development partners, and civil society. IDA commitment to Mozambique’s development Decentralization and Good Governance. IDA effort is governed by the priorities set forth support to decentralization has helped bring in its Country Partnership Strategy (cover- the government closer to the people. It has ing 2007-11), which itself is guided by the also empowered citizens, and promoted voice country’s own priorities as set forth in the and accountability. For instance, today at least government’s poverty reduction action plan, 82 percent of the districts are implementing known as PARPA from its Portuguese acronym. projects identified by the communities in the Current assistance combines investment, district plans. The district administrations knowledge and policy dialogue, technical have received a direct budget allocation for assistance, budget support, and debt relief. the first time ever and they have developed methodologies to improve collection of their Results local revenues. Given the political thrust towards greater decentralization, the policy Ports and Railways. IDA support has been and legal changes in the country, and the instrumental in revitalizing the railway and success of this initiative, the Government of port systems in Mozambique. Drawing upon Mozambique has decided to establish a single IDA funding and expertise since 1999, the National Decentralized Planning and Finance Mozambique port and railways system staff Program to support implementation of the productivity increased seven-fold by 2009; new policies, laws, and budget allocations the port traffic in 2008 was 11.3 million tons for district development. In 2010, IDA has compared to 8.5 million tons in 2002; the rail approved a total of US$30 million as addi- traffic in 2008 was 4.3 million tons compared tional support to the sector, to build upon the to 3.4 million tons in 2000 when IDA initiated achievements of that first phase. its support to the sector. The restructuring of the public company that runs the ports and Water. Institutional reforms in the water sec- railways system enabled the it to register tor started in 1995 with the formulation of a surplus - for the first time in decades - of an IDA-supported national water policy. The more than US$50 million per year for the last urban water sector has since made consider- four years (more than $80 million in 2009). able progress in the introduction of a delegated 2 management framework—whereby assets are ing redeploying government expenditures owned by the government and operations are towards key social sectors and small-holder managed by independent operators including agriculture, liberalization and privatization the private sector. In addition, IDA supported in industry and agriculture, and financial sec- the creation of an asset holding company and tor reform. Mozambique’s post-war success a regulatory board that laid the groundwork was built on a number of reforms that worked for improving service levels and attracting because they were based on sound knowledge investment. Mozambique’s delegated private and analysis, because they benefited from sector management approach has attracted other countries’ experiences. IDA’s technical about US$350 million of investments for urban expertise, worldwide experience, and abil- water over the last six years. Between 2002 ity to integrate knowledge from across the and 2008, actual expenditure in the water whole spectrum of development work were sector increased 255 percent. The number essential contributors. For example: the of piped water connections increased by 40 successful liberalization of the telecommuni- percent between 2003 and 2008 in Maputo cations sector emerged from a discussion of and the number of rural water access points Madagascar’s experience with liberalization increased by 45 percent over the same of its mobile telephony. Other examples are period. the restructuring and recovering of the ports and rail system; and the revitalization of the Education. IDA-supported reforms in the mining sector. as well as investments in water education sector have resulted in a new and sanitation. curriculum for primary education, and are having a direct impact on the quality of As of August 2010, there are 22 ongoing education. Other IDA-backed achievements projects in the portfolio including 15 IDA include an expanded national program of investment projects, one guarantee from the direct support for schools introduced in 2004, International Bank for Reconstruction and the first providing direct financing to primary Development, two IDA-administered Global schools aiming at quality improvement and Environment Facility (GEF)-funded projects, decentralization. Since 2006, this program two IDA-funded regional projects and one received a boost with a financial contribution IDA-funded general budget support operation.  from other partners and was expanded in In addition, there are two IDA-administered, 2008 to secondary schools. donor-funded trust funds for the educa- tion and water sectors. Together, the above IDA Contribution operations represent a total net commitment of US$923.8 million and include the following Since the end of the civil war, IDA has commit- sectors: human development (education and ted almost US$4 billion in support of over 60 health); private sector development; water projects and completed more than 50 formal and sanitation; transport infrastructure in-depth analytical reports on Mozambique. (roads, rail, ports, and bridges); agriculture A first IDA economic recovery credit in 1992 and rural development; decentralization and supported a broad post-war strategy, includ- urban development; and budget support. 3 Partners and is housed at the premises of the National Public Library in Maputo. As part of IDA’s commitment to alignment and harmonization, it works closely with other Moving Forward development partners to improve the quality and effectiveness of development assistance IDA will continue to broaden its support to to Mozambique. Fundamental to IDA’s assis- Mozambique in alignment with the country’s tance strategy for Mozambique is the provi- own priorities and in close collaboration sion of general budget support to implement with other development partners to help the key policy actions of the country’s poverty Government of Mozambique address some of reduction plan. The budget support operation its major challenges ahead, including : foster is closely aligned with the general budget private sector-led growth through improving support activities of 19 other development the business environment as a mean to cre- partners, namely the African Development ate jobs; support the government in boosting Bank, Austria, Belgium, Canada, Denmark, agricultural productivity; continue support to European Union, Finland, France, Germany, the road sector as Mozambique still has one Ireland, Italy, Netherlands, Norway, Portugal, of the least developed road networks in the Spain, Sweden, Switzerland, and the United southern African region; support the expan- Kingdom. sion of energy access as the country still lags in terms of access to energy. Recent data from In addition, IDA has approved recently the the UN Development Programme estimated National Decentralization Planning and that the electrification rate was at a mere 6 Finance Program, which seeks to further percent in 2007, this despite greater flows of advance the decentralization agenda in investments into the sector in the past five Mozambique by funneling US$30.4 million years. worth of IDA financing to a Common Fund agreed upon between the Government of Beneficiaries Mozambique, the World Bank, the United Nations in Mozambique, Germany, Switzer- About four million Mozambicans are now land, Ireland, and the Netherlands. Other connected through cell phones thanks to the past and present collaborations include in the liberalization of the sector conducted under areas of education, health, and roads, but IDA’s technical assistance. also fiduciary and monitoring and evaluation. IDA support to the rail, roads and ports IDA has a long-established partnership with systems has helped rehabilitate hundreds of UN agencies, but also recently with the kilometers of rail lines and roads destroyed by African Development Bank and International the war and thus directly benefiting millions Monetary Fund in establishing a Development and enabling companies to transport goods to Information Center to further expand access markets, creating wealth and jobs, and lift- to information produced by those institutions. ing millions out of the poverty trap, as well as The Center is meant to be a one stop shop for allowing young people to attend schools and access to development related information seek medical assistance. 4 IDA budget support operations, policy dia- IDA support, together with that from other logues and technical assistance to the Ministry donors, has been instrumental in expanding of Finance and other key ministries helped the water access to millions of Mozambicans country put in place a sound macroeconomic countrywide. Likewise, IDA consistent and management, which became key to the over- robust financing to the education and health all economic performance registered. sectors have made it possible for millions to access education and health. The continuous technical assistance and advi- sory work undertaken in the business envi- Last updated September 2010. ronment have resulted in greater emphasis http://www.worldbank.org/ida in reforms aimed at reducing red tape, and improving the overall business environment, essential in promoting private investment and job creation. 5