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World Bank Document Document of The World Bank Report No. 103507-MZ Public Disclosure Authorized REPUBLIC OF MOZAMBIQUE SYSTEMATIC COUNTRY DIAGNOSTIC Public Disclosure Authorized Date: June 2016 International Development Association Public Disclosure Authorized Southern Africa Country Department 2 Africa Region International Finance Corporation Sub-Saharan Africa Department Multilateral Investment Guarantee Agency Sub-Saharan Africa Department Public Disclosure Authorized WORLD BANK GROUP Republic of Mozambique – Government Fiscal Year January 1 – December 31 Currency Equivalents (Exchange Rate Effective as of June 15, 2016) Currency Unit = New Mozambican Metical (MZN) US$1.00 = MZN 60.8 Abbreviations and Acronyms AfDB African Development Bank ALRI Acute Lung and Respiratory Infections ANS Adjusted Net Savings ASM Artisanal and Small-Scale Mining BdM Bank of Mozambique (Banco de Moçambique) DHS Demographic and Health Survey DSA Debt Sustainability Analysis DUAT Land Utilization Rights (Direitos de Uso e Aproveitamento da Terra) EdM Mozambique Electricity Company (Electricidade de Moçambique) EITI Extractive Industries Transparency Initiative EMATUM Mozambican Tuna Company (Empresa Moçambicana de Atum) ENH National Hydrocarbon Company (Empresa Nacional de Hidrocarbonetos) ENSSB National Strategy for Basic Social Security (Estratégia Nacional de Segurança Social Básica) FDI Foreign Direct Investment GDP Gross Domestic Product HDI Human Development Index IAF Household Consumption Survey (Inquérito aos Agregados Familiares) IBRD International Bank for Reconstruction and Development ICT Information and Communication Technology IFC International Finance Corporation IMF International Monetary Fund INE National Institute of Statistics (Instituto Nacional de Estatística) INSS National Institute of Social Security (Instituto Nacional de Segurança Social) IOF Household Budget Survey (Inquérito ao Orçamento Familiar) MDM Mozambique Democratic Movement (Movimento Democrático de Moçambique) MIGA Multilateral Investment Guarantee Agency MINAG Ministry of Agriculture MPD Ministry of Planning and Development MSME Micro Small and Medium Enterprises PASD Direct Social Support Program (Programa de Acção Social Directa) PASP Productive Social Action Program (Programa de Acção Social Produtiva) PPP Public-Private Partnership PSSB Basic Social Subsidy Program (Programa de Subsídio Social Básico) ROC Regional Operations Committee SACMEQ Southern and Eastern African Consortium for Monitoring Education Quality ii SADC Southern African Development Community SAPP Southern African Power Pool SCD Systematic Country Diagnostic SEZ Special Economic Zone SSA Sub-Saharan Africa STEM Science, Technology, Engineering and Mathematics TFP Total Factor Productivity TFR Total Fertility Rate TIA Agricultural Survey (Trabalho de Inquérito Agrícola) TVET Technical and Vocational Education and Training UNDP United Nations Development Programme UNHDI United Nations Human Development Index UNECA United Nations Economic Commission for Africa VAT Value-Added Tax WASH Water, Sanitation and Hygiene WDI World Development Indicators WHO World Health Organization IBRD IFC MIGA Regional Vice President: Makhtar Diop Nena Stoiljkovic Karin Finkelston Country Director: Mark Lundell C. Oumar Seydi Yasser Ibrahim Task Team Leader: Julio Revilla Jumoke Jagun-Dokunmu Conor Healy iii Table of Contents Acknowledgements ................................................................................................................. ix 1. Overview ........................................................................................................................... 1 1.1. Economic Growth and Poverty Reduction in Mozambique ........................................... 1 1.2. Opportunities and Challenges as a Resource-Rich Nation ............................................. 2 1.3. Household Assets, Economic Connectivity and the Distribution of Public Spending ... 3 1.4. Productivity, Employment and Diversification .............................................................. 4 1.5. Investing in Human, Physical and Institutional Capital .................................................. 6 1.6. The Demographic Transition .......................................................................................... 6 1.7. A Note on Data Limitations ............................................................................................ 7 1.8. Outline of the Systematic Country Diagnostic ............................................................... 7 2. The Evolution of Poverty and Inequality in Mozambique ......................................... 11 2.1. The Slowing Pace of Poverty Reduction ...................................................................... 11 2.1.1. The Depth of Poverty ............................................................................................. 13 2.1.2. The Poverty Deficit ................................................................................................ 14 2.1.3. Growth, Poverty Reduction and Inequality ........................................................... 16 2.2. Poverty Profiles over Time ........................................................................................... 26 2.3. Regional Poverty Dynamics ......................................................................................... 30 2.4. Changing Demographics and Challenges for Poverty Reduction ................................. 31 2.5. Accelerating Poverty Reduction: Challenges and Opportunities .................................. 34 3. Key Growth Constraints and Economic Opportunities ............................................. 35 3.1. Economic Growth in Perspective .................................................................................. 35 3.2. Drivers of Growth ......................................................................................................... 38 3.3. The Challenge of Diversification .................................................................................. 41 3.4. Constraints to Private-Sector-Led Growth and Competitiveness ................................. 43 3.4.1. Cross-Cutting Constraints to Growth: Infrastructure ............................................. 44 3.4.2. Cross-Cutting Constraints to Growth: Governance ............................................... 50 3.4.3. Cross-Cutting Constraints to Growth: Access to Credit ........................................ 51 3.4.4. Cross-Cutting Constraints to Growth: Land Tenure .............................................. 54 3.4.5. Cross-Cutting Constraints to Growth: Dutch Disease ........................................... 56 3.5. Opportunities for Growth in the Agricultural Sector .................................................... 57 3.6. Renewable Natural Resources ...................................................................................... 63 3.6.1. Fisheries ................................................................................................................. 63 3.6.2. Forestry .................................................................................................................. 64 3.7. The External Sector....................................................................................................... 66 3.8. Information and Communication Technology .............................................................. 68 3.9. Extractive Industries ..................................................................................................... 69 3.10. The Role of Growth Corridors .................................................................................... 72 3.11. Promoting Private-Sector-Led Growth: Challenges and Opportunities ..................... 74 4. The Inclusiveness of Growth ......................................................................................... 77 4.1. Labor Market Characteristics and Challenges .............................................................. 78 4.2. Education ...................................................................................................................... 82 4.2.1. Primary and Secondary Education ......................................................................... 83 4.2.2. TVET and Higher Education ................................................................................. 86 4.3. Health ............................................................................................................................ 87 4.4. Access to Water and Sanitation .................................................................................... 91 4.5. Social Protection ........................................................................................................... 95 4.6. Urbanization .................................................................................................................. 97 iv 4.7. Fostering Inclusive Growth: Challenges and Opportunities ....................................... 100 5. Risks to the Sustainability of Growth and Poverty Reduction ................................ 102 5.1. Fiscal and Macroeconomic Sustainability .................................................................. 102 5.2. Weak Public Institutions and the Challenge of Natural Resource Management ........ 111 5.3. Political Stability ......................................................................................................... 113 5.4. Social Sustainability...................................................................................................
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