World Bank Supports Mozambique in Harnessing the Transformative Potential of its Growth through Smart Reforms

December 22, 2015

WASHINGTON, December 22, 2015 — Today the World Bank Board of Executive Directors has approved US$70 million in support of the Government of Mozambique’s State Budget and its 5-year plan (Plano Quinquenal do Governo – PQG). This International Development Association (IDA) funding is provided under the Eleventh Poverty Reduction Support Credit (PRSC XI) program that supports the Government’s programmatic reform agenda agreed upon with the World Bank in the context of general budget support.

Mozambique’s Gross Domestic Product (GDP) growth averaged more than 7 percent over the past two decades. However, there has been relatively little structural transformation in the economy resulting from that growth pattern. The share of the manufacturing sector contribution to the economy grew from 13 percent in the early 1990s to only16 percent in the early 2000s, and fell to 10 percent in 2010-14. The share of the agricultural sector, which initially fell from 35 percent before the end of the war to 24 percent in the early 2000s, has recently increased to 27 percent. Moreover, recent strong growth has had limited effect in poverty reduction.

“Mozambique widely recognizes the need for a shift in the country’s development paradigm toward one that is broad based and inclusive,” said Mark Lundell, World Bank Country Director for Mozambique, Madagascar, Mauritius, and Seychelles. “This PRSC XI assists Mozambique’s efforts to improve its business climate, unleash the country’s ability to sustain an inclusive economic growth, and create jobs; key elements for tackling poverty reduction more effectively.”

This PRSC series also supports Mozambique in implementing reforms aimed at strengthening social protection, enhancing public finance management, and improving transparency and management in extractive industries. “Reforms aimed at improving regulatory regime for extractives help promote investments in the sector. The revised fiscal regime ensures that the Government is able to capture a fair share of the rents generated. Likewise, greater transparency in the use of natural resources revenues will contribute to a more judicious use of resources and sharing of benefits. Finally, by supporting efficiencies in the current social protection programs, the PRSC series seeks to contribute to poverty alleviation more directly,” said Julio Revilla, World Bank Lead Economist for Mozambique.

This Eleventh Poverty Reduction Support Development Policy Financing is fully aligned with the priorities of the Government’s new 5-year plan and is an integral part of the Bank’s strategy to support it. The proposed operation is the third and final of three annual single-tranche operations to be delivered over FY13-16. Fifty percent of the US$70million funding approved today is conceded in the form of a grant, while the other half is a concessional loan. 

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