Overview

Mozambique’s annual Gross Domestic Product (GDP) growth averaged 7.4% over the past two decades. Sound macroeconomic management, large-scale foreign-investment projects, political stability, and significant donor support have contributed significantly to such performance. However, the rapid growth of the past decades has not always translated into significant poverty reduction. Strong economic growth was accompanied by large decreases in poverty until the early 2000s. The national poverty headcount fell by 14 percentage points between 1997 and 2003 to 56%, while income per capita grew by 36% during the same period. In contrast, poverty fell by only 4% between 2003 and 2009, a much slower rate of decline. The weakened relationship between growth and poverty reduction is due to the changing pattern of growth, which in the past decade was driven by capital-intensive, import-dependent sectors. This pattern of growth is also reflected in labor markets, which continue to be dominated by low skilled labor in the agricultural sector; meanwhile, the rest of the economy is unable to offer better-remunerated jobs for the 300,000 new workers entering the labor force every year.

Furthermore, the geographical distribution of poverty remains largely unchanged, with both moderate and extreme poverty concentrated in rural areas and in the Central and Northern regions. Regional differences have increased over time, as the moderate reduction in poverty observed in the mid- and late-2000s was led by declining poverty rates in the less poor Southern region and in urban centers, especially the Maputo area. Nationwide, rural poverty continues to be severe and pervasive. In places where rural poverty reduction has occurred it has been concentrated in the southern provinces, reflecting spillover effects from the rapid growth of urban centers in the region. Elsewhere in the country rural poverty rates remain unchanged, and in Central Mozambique the poverty headcount actually increased between 2003 and 2009.

Recent discoveries of large deposits of coal and gas may transform Mozambique into a significant player in global markets. However in order for Mozambique to reap the benefits of a growing resource sector it will need to develop the capacity to manage the country’s extractive industries and ensure that they contribute to sustainable and broad-based growth. Recent “megaprojects” in coal, mineral-sands and natural-gas extraction and processing have thus far had only a limited impact on employment and poverty reduction. Some of the challenges ahead include the formulation of strategies for developing Mozambique’s coal and natural gas reserves, determining how these industries interact with other economic sectors, and ensuring that the expected increase in natural resource revenues are used in the most effective way, avoiding the fate of many other natural resource rich countries.

Political Overview

Following independence from Portugal in June 1975, the country underwent a 16-year armed conflict that ended in 1992. The transition to peace, political stability, and democracy culminated in the country’s first democratic elections in 1994 and the emergence of the Front for the Liberation of Mozambique (FRELIMO) as the dominant political force in the country, a fact that still holds true today.

Since January of 2015 Mozambique has a new president, Filipe Nyusi; the winning ruling party Frelimo candidate of October 2014 general elections. His party also secured a strong majority in the parliament (144 seats out of 250 in total), though in sharp decline compared to the previous election in 2009 when it garnered 75% of the vote. Renamo, the largest opposition and former rebel group, more than doubled its seats to 89 seats, and MDM, a third political party with parliament representation, obtained 17 seats, also doubling its presence.

Development Challenges

Mozambique’s rapid economic expansion over the past 20 years has had only a moderate impact on poverty reduction, and the geographical distribution of poverty remains largely unchanged. Mozambique also needs to improve its social indicators. The country ranked 178th out of 187 countries in the Human Development Index (HDI) in 2014. The adult literacy rate is 56%, and average life expectancy at birth is just 50.3 years. Infant and child mortality rates and child vaccination rate have progressively improved, placing Mozambique on track to achieving Millennium Development Goal 4, Reduce Child Mortality. Mozambique faces other challenges such as increasing malnutrition, with large negative impacts on physical and mental development. Malaria remains the most common cause of death, responsible for 35% of child mortality and 29% for the general population. HIV prevalence among adults shows a downward trend, stabilizing at a relatively high rate of 11.5%.

In education, important progress has been in access and gender parity. Between 2009 and 2014, net enrolment of six-year-old children increased from 67 to 82%, and Mozambique compares well with peer countries such as Ghana and Namibia. Further, every year more children are in the education system overall. Challenges still remain in school retention and quality of learning outcomes. Progress has not been even across all dimensions of social development, with slower progress in water and sanitation.

The social progress index for access to improved sources of water and sanitation ranks Mozambique 128th and 119th, respectively, out of 135 countries. Indeed, Mozambique has one of the lowest levels of water consumption in the world. Further, overall, it is estimated that approximately 41% of the population practice open defecation. As a response to such challenges, the Mozambican authorities have considered the social sectors as priority ones and funding has been increasing for the sectors in general. 

Last Updated: Apr 16, 2015

World Bank Group (WBG) Assistance

 Since 1984, the WBG has been providing development assistance to Mozambique in accordance with the country’s needs and priorities, from economic stabilization in the 1980s, to post-war reconstruction in the early 1990s, to a comprehensive support strategy in the late 1990s, to the current Country Partnership Strategy (CPS) for FY2012-2015, which involves close collaboration with the government, development partners, and civil society to ensure sustainable and inclusive growth.

The CPS draws on the latest Government’s Poverty Reduction Strategy Plan (PARP) for 2011-2014.  Like the Africa Regional Strategy, the CPS has two cross-cutting pillars and a foundation:

  • Competitiveness and employment. In view of structural issues and growth and poverty trends, the Bank looks to help improve the regulatory environment; prioritize investments through spatial planning; enhance agricultural productivity and employment in potential growth sectors; improve provision of transport, water, energy, and other infrastructure; and promote an educated, skilled, and healthy workforce.
  • Vulnerability and resilience. Given the country's susceptibility to idiosyncratic and exogenous shocks, the Bank aims to help improve health services for the vulnerable; strengthen social protection; and encourage climate change adaptation and reduce vulnerability to natural disasters.
  • Governance and public sector capacity. Key to achieving the country's development objectives is improved public financial management, particularly at the sector and local levels; improved citizen participation in service delivery monitoring; greater contribution of wildlife conservation to the economy; and improved transparency in extractive industries.

 

World Bank Group Support

The World Bank portfolio for Mozambique as of March 2015 consists of 24 IDA projects and a net commitment of $1.7 billion.  It is the 10th largest in the AFR Region in terms of net commitments and second largest in terms of number of projects.  The portfolio is diverse, covering a broad range of sectors and themes.  Infrastructure (including transportation, water and sanitation) receives the largest portion of financing support, followed by public sector management and education. 

World Bank Group Non-Lending

Mozambique benefits from an important number of analytic work and technical assistance that are prepared in collaboration with the Mozambique government, development partners, and other stakeholders, and are widely disseminated once completed. The financing for these studies is from the World Bank’s administrative budget as well as from other development partners

The International Finance Corporation, IFC

IFC’s strategy is to focus on a strategic industries, namely, Agribusiness, Forestry, Mining, Energy, Industry and Financial Services and its interventions will address the cross-cutting issues of (i) supporting the mobilization of both local and foreign direct investment to key sectors of the economy; (ii) strengthening private sector access to finance, (iii) supporting the development of infrastructure, (iv) improving the investment climate, (v) increasing linkages between large investments and the local economy, and (vi) strengthening SME management capacity building. In FY14, IFC committed a total of $55 million in investments in Midal cables and ETC group.

The Multilateral Investment Guarantee Agency, MIGA

MIGA’s current gross exposure in Mozambique is $38.8 million (net exposure $26.6 million), across mining, agribusiness, manufacturing, infrastructure and oil and gas sectors.  The following is a summary table of MIGA’s current supported investments in the country.

 

Last Updated: Apr 16, 2015

Mozambique Trans-frontier Conservation Project --The project objective was to achieve growth in community-private sector led environmentally and socially sustainable tourism in Trans-frontier Conservation Areas (TFCA). It was implemented by the Ministry of Tourism, and benefited local communities in four large Trans-frontier Conservation Areas – in the provinces of Maputo, Gaza, Inhambane and Manica in Mozambique. Mozambique concluded the 8-year Trans-frontier Conservation Project in FY15, which led to over 200,000 visitors annually to Mozambique's Conservation Areas, leveraged over US$3 million in nature-based private investments and increased the network of conservation areas by almost 200,000 hectares targeted at biodiversity critical areas.

Mozambique Reestablished transportation connectivity Project -- Mozambique is highly vulnerable to extreme weather events; a vulnerability that is expected to increase as a result of climate change. In January of 2013, torrential rains in the Limpopo River Basin led to widespread and devastating floods in Gaza Province of southern Mozambique. The floods resulted in loss of life (113 deaths), displacement of at least 170,000 residents, loss of agricultural capacity, and destruction of several critical road and bridge connections. The affected population was primarily rural agricultural households living at or below the poverty line. Nearly 70% of the entire province’s road network (about 3205 kilometers) was impacted. Many rural communities were left without road access to population centers or critical services, including health centers. Following the floods, farmers with produce struggled to reach markets, raising concerns about food security and rural livelihoods.  Through an emergency intervention, the World Bank provided financing to Mozambique through credits and grants from the IDA Crisis Response Window (US$39.4 million)as well as the Strategic Climate Fund (US$15.75 million) resulting in greater focus on climate resilience and emergency recovery efforts. The United Kingdom’s Department for International Development (DfID) provided grant funding (US$ 15.0 million) to the project which was used to restore over 620 kilometers of road connectivity ahead of the rainy season, including critical culverts, bridges, and drainage and erosion management features. Completed in 2014, the emergency works directly benefitted a population of approximately half a million. 

Access to improved water sources --The Mozambique Water Services and Institutional Support (WASIS) Project was designed to build, strengthen, and deepen the impact of a program of water sector reforms, which commenced in early 1990’s - after the countries emergence from the protracted civil war.  Specifically, WASIS supported the third phase of reforms which aimed at consolidating water supply operations and increasing coverage in large urban centers and small towns through implementation of services under a delegated management framework.   The project, with a total value of around US$80 million, was co-financed by IDA (65%), the Africa Catalytic Growth Fund (19%) and the Australian Government (16%), and supported key institutional development and infrastructure activities.  The project investments have assisted the Government to create sustainable service delivery and regulatory models for water services in cities and towns.  Furthermore, the infrastructure investments, coupled with the institutional support activities, have significantly improved water service coverage and quality standards in 13 cities, directly benefiting 779,912 people in urban areas and 57,115 people in small towns.

Mozambique’s Smallholder Development in the Zambezi Valley Project --The Project aimed at increasing the incomes of smallholder farmers in the Zambezi Valley while limiting land degradation through increases in areas under improved sustainable land management (SLM). The Project successfully contributed to both objectives.  Incomes among project participating smallholders increased by 85%, and increased by 65% compared to non-project comparable smallholders in the Zambezi Valley. On SLM, the project resulted in the placement of 21,313 hectares under sustainable land management practices. Interventions under the project allowed the creation of over 700 community-based organizations, and more than 7,000 smallholder farmers were engaged in savings and loans groups (SLGs), 50% of which were women. A total amount of about $130,000 was obtained as credit by SLG members. The project also invested in post-harvest management at the household level and facilitated market linkages with various agribusiness value-chains through the promotion of market fairs where community producers were able to show-case their products to buyers. This was complemented by other interventions including investments in market access infrastructure such as small rural bridges, drifts and rural access roads.  Innovations under the project included:

  • The implementation of project activities by district authorities, which led to focusing on strengthened capacities of district staff, responding to local development needs and improving service delivery by local authorities;
  • The introduction of SLM practices that responded to local challenges including bush fire, which was controlled through the introduction of new, improved honey collection methods in communities;
  • The use of SLGs as a means to strengthen community-based organizations (CBOs), which resulted in stronger smallholder farmer groups, and
  • An increase of the outreach of extension services through the construction of residences for extension officers in various areas within the districts, and the identification of lead farmers within the communities, who were trained on various farming techniques and became community facilitators and led the introduction of new farming techniques.

Overall, the interface between agricultural and natural resources interventions created the basis for long-term approaches to reduce vulnerability and strengthened the communities’ focus beyond the immediate subsistence needs. The challenge remains on how to sustain such community empowerment and how to replicate and scale-up across the other provinces of Mozambique.

Health Services Delivery Project -- Mozambique’s health system faces challenges in human resources, public financial management, health care financing, and health coverage and quality of care. The country has the fifth lowest ratio of health workers to population (0.03 doctors, and 0.21 nurses per 1,000 inhabitants) in Africa. The World Bank, through its support to the government’s Health Services Delivery Project is providing finance, among other things, to a rural health training institute to train qualified health workers to help tackle the human resource shortage in some of the most underserved regions in the country which account for almost half of the country’s total 25 million people.  The project also supports service provision at the local level, including by expanding community based services, mobile units to serve remote areas, training of personnel in health and nutrition, as well as the training of a new type of technical personnel, known as Community Health Agents. These Community Health Agents operate as agents of change and as sources of knowledge for rural dwellers and underserved communities.  An often neglected challenge faced by the Mozambican health system in rural areas is the persistence of cultural beliefs and myths that get in the way of adoption of good practices in nutrition, maternal health, and child care. Some noteworthy results of that component of the project include 351 new health professionals trained to date. Given the high rate of malnourishment among children in rural areas in particular, the project is also training nutritionists in the City of Quelimane, center of Mozambique, who will be deployed across the country.

The World Bank Group (WBG) provides funding for Private Institutions of Technical and vocational training across the country -- The WBG, through its support to the Government of Mozambique’s Technical and Vocational Education Training Project (PIREP), and more precisely its FUNDEC component, has been steadily supporting skills development in the country. In its 5th cycle of funding, FUNDEC has directly supported financially 167 local projects with most of the recipients being private institutions of professional training and skills development in agriculture, agro-processing, livestock, tourism and hospitability management, and works.  Institutions from across the country have thus benefited from funding in developing their services. About 38,525 people benefited from skills development and training so far and 312 managers in various fields of work have also attended training. In addition to training for unemployed and self-employed people, managers and owners of private institutions that provide technical and vocational training have benefited from management training themselves.

Last Updated: Apr 16, 2015

The World Bank works closely with other development partners to improve the quality and effectiveness of development assistance to Mozambique. Fundamental to the World Bank’s assistance strategy for Mozambique is the provision of general budget support to implement key policy and institutional reforms under the country’s poverty reduction plan. The budget support program is now on its tenth operation and it is closely aligned through a common performance framework with the general budget support activities of other development partners, including European Union, United Kingdom, among others. Collaboration with development partners has also focused on education, health, roads, and fiduciary and monitoring and evaluation.

The World Bank partnership includes financing to civil society groups through the Global Partnership for Social Accountability, as well as support to member of the parliament (MPs) in the form of access capacity through conferences and peer learning opportunities with other countries’ MPs.  

Last Updated: Apr 16, 2015


LENDING

Mozambique: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments