World Bank launches online consultations for its diagnostic paper on Mozambique
Every five years the World Bank takes stock of Mozambique’s development progress and challenges via a Systematic Country Diagnostic (SCD) which informs the institution’s five-year lending and advisory program called Country Partnership Framework.
The SCD is prepared in close consultation with the government, development partners, civil society actors, academics and think tanks, the private sector, and other key stakeholders. The SCD seeks to identify the most promising reforms - alongside the most salient challenges - that could help raise the country’s growth performance and ensure that this growth translates into adequate poverty reduction and shared prosperity.
The last SCD was finalized just as the hidden loans’ crisis broke in the spring of 2016 and was based on data and events that took place prior to 2015. At the time, Mozambique could look proudly back on two decades of 8 percent economic growth per year, but with very limited progress on poverty reduction to show for it, as growth was driven by a dramatic increase in investment in capital-intensive megaprojects that created limited employment.
Since then, some of Mozambique’s aspirations have materialized, but there have also been setbacks. New data since 2016 shows that the rate of poverty reduction had in fact picked up between 2008 and 2015. However, rapid population growth means that the total number of people in poverty today is still higher than it was in the early 2000s, and inequality has also been rising. Finally, a series of natural disasters – the twin cyclones Idai and Kenneth that hit Mozambique in 2019 and the COVID-19 pandemic in 2020 – most likely erased a good portion of the social gains of the past five years and once again underscored the country’s vulnerability to shocks.
On the economic front, the debt crisis of 2016 dented Mozambique’s ability to attract donor financing and raised doubts about the quality and health of its institutions. This played a significant role in halving the country’s formerly stellar growth rate. This is a trend that has been further aggravated by the pandemic. At the same time, the insurgency in Cabo Delgado is negatively impacting investment confidence in the LNG sector and delaying production plans.
Mozambique’s rich endowment of natural capital, such as subsoil assets, abundant agricultural land, forests, fisheries, and conservation areas are often highlighted as key areas that could contribute to the country’s potential to create employment and diversify economic growth. The SCD poses the question of how Mozambique could leverage the full potential of its resource wealth to accelerate progress on poverty reduction and shared prosperity.
The forthcoming SCD Update will consider the above and will be organized around three critical pathways by which to attain growth and poverty reduction: private sector development, human capital improvement, and the sustainable management of natural assets and the rural economy. Governance challenges and fragility will be considered as cross-cutting constraints to growth and poverty reduction.