Mozambique continues to experience persistently high levels of poverty, low Human Development Index (HDI) score, and a labour force which is overwhelming dependent on subsistence agriculture or informal sector employment.

The country’s main policies and strategies are embedded in the national long term vision, the Agenda 2025, and in the midterm Government Five-Year Programme along with its operational plan, the Plano de Acção para a Redução da Pobreza Absoluta (PARPA). The efforts to implement these policies and strategies are hampered by capacity constraints within the Government.

Improving the quality of policy design and implementation remains crucial for the alleviation of poverty and promotion of inclusive economic growth, as well as the achievement of the broader development goals, including the Millennium Development Goals (MDGs). However, the capacity to implement policies needs to be deeply rooted in the national context, such as improved public governance.

It also requires that planning and budgeting processes are closely linked and integrated across sectors. In Mozambique, monitoring and evaluation processes and capacities vary significantly across sectors and between the different levels of government. These need to be strengthened to provide decision makers with information on the impact of current policies and effect of individual programmes.

Mozambique is benefiting from a strong commitment from the international donor community. The down side of this is the creation of a high level of aid dependency. About 50 per cent of annual government spending is being met through external assistance.

The economic structure of the country with a minute formal sector lacks the broader tax base to effectively reduce the level of aid dependency. The low tax base represents a significant development challenge for Mozambique. Another aspect is that the high level of external assistance introduces a significant demand for coordination and harmonisation of both aid and policies.

Positive milestones in furthering the Paris Declaration Agenda have been recorded in the country, particularly in the recent years with the advent of the new aid and funding modalities. Predictability of aid flows, however, is still low, especially in the medium term. This lowers the ability of the Government to utilise aid as a mid to long term development resource, and has a potential negative effect on macroeconomic stability in the short run. A factor contributing to this unpredictability is the political and legal inability of many donors to commit resources in the mid to long run as well as aid conditionality.

2. About the Economic and Policy Analysis Unit (EPAU)

3. EPAU key deliverables

4. EPAU key partners

UNDP Contacts:

· Thomas Kring – Economics Advisor
Email: Thomas.Kring@undp.org