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MOZAMBIQUE
>> AFR Regional Overview >> Mozambique Overview
Development Challenge Summary Tables
Program Summary
Previous Years' Activities
2001, 2000, 1999, 1998, 199748
Introduction
Mozambique's continued political stability and economic growth are essential to U.S. interests in Southern Africa. As a large and growing economy, Mozambique provides a growing market for U.S. exports, and continues to attract significant U.S. investment in agriculture, fisheries, minerals, and natural gas reserves. The country also is increasingly important for U.S. commercial interests elsewhere in this region as it provides ocean access for landlocked countries and the industrial heartland of South Africa.
While still one of the world's poorest countries, Mozambique is a major democratic success story in sub-Saharan Africa. USAID was vital to the success of the 1992-95 peace process, and continues to be a leader among Mozambique's international partners. USAID plays a pivotal role as the country continues its remarkable democratization and economic revival. In the aftermath of severe flooding in February and March 2000, and as part of the Southern Africa Flood Reconstruction supplemental appropriated by Congress, USAID assistance is reducing the severe economic impacts of the flooding disaster, as well as assisting thousands of families to recover their livelihoods.
After annual 10%-12% gross domestic product (GDP) growth and low inflation over 1997-1999, GDP growth in 2000 slipped to 3.8% and inflation grew to 11.8%, largely as a result of the flooding in southern and central Mozambique. Still, fundamental legal and regulatory reforms continued, making the country attractive to domestic and foreign investors. During 2000, significantly simplified procedures for business registration and operations, including imports, were further refined. Mozambique joined the Southern Africa Development Community (SADC) Free Trade Area and the old agricultural marketing parastatal was dismantled. In addition, a second-round red tape reform agenda was established with broad private and public sector participation. Investment incentive policies were further refined and promulgated. Business, civil society, and the media played important roles in these changes as broad public debate on major reforms continues to expand. In 2000, Mozambique qualified for the Enhanced Heavily Indebted Poor Countries debt forgiveness initiative and debt payments were reduced or eliminated.
The Development Challenge
Mozambique faces many challenges to eradicate poverty, reduce mortality, increase incomes, and establish democratic institutions and practices. Eighty percent of the population is rural, two-thirds live in abject poverty, and 88% depend on agriculture and fisheries. Slash-and-burn agriculture and indiscriminate logging are leading to erosion and soil loss, sedimentation of waterways, and destruction of the marine ecosystem. Over 45% of Mozambicans are less than 15 years old, and the population growth rate, although reduced to 2.3% per annum, still is high enough to erode improvements in the standard of living. Health facilities have expanded, but 40% of the population still live without access to health services, and 50% of child deaths result from common treatable diseases. Only 23% of adult women are literate, and a meager 4% have attended secondary school. While 63% of children aged seven-to-ten years old are now in school, qualified teachers and classrooms are not available to meet current or projected demand. HIV infection is estimated at 10%-20% and growing, with frightening implications for social stability and economic development.
Sound policies are essential for both rapid economic growth and democratization, and USAID has influenced and supported Mozambique's reforms. The Government of the Republic of Mozambique (GRM) has achieved ambitious financial sector reforms and promoted privatization and decentralization; the economy averaged 8.7% growth annually during 1993-99 and achieved currency stability and low inflation. However, Mozambique is still vulnerable to debt problems, and domestic revenue increases achieved to date still are insufficient to finance urgent public sector investments.
An immediate challenge facing the country is the reconstruction of public infrastructure destroyed by floods in 2000. In the south-central provinces, the challenge will be to rapidly implement the projects included in the GRM's reconstruction program. This includes four road segments, one major bridge, and one of Mozambique's principal railroads, all under construction with USAID supplemental funding. Much of the infrastructure in the north-central provinces most-affected by the civil war remains in severe need of reconstruction, including roads, bridges, and another major railroad system. The 2001 flooding of the Zambezi River has, in fact, reversed some of the progress made in this regard. Much of the reconstruction of public sector infrastructure will require significant funding from the public budget.
Mozambique's transition to democracy is still fragile. The difficult relationship between the executive branch and the main opposition party, the National Resistance for Mozambique (RENAMO), is having a detrimental impact on the functioning of Parliament. The executive branch and RENAMO are now engaged in an expanded dialogue aimed at reducing tensions that were a by-product of the 1999 elections. Relations between the major parties will continue to require patience and continued political commitment. Municipal governments created following the 1998 local elections are extremely fragile. The 1999 presidential and legislative campaigns demonstrated the weak constituency outreach of all political parties; improvements will be essential to sustain the dynamic multiparty character of Mozambique. Effective and transparent debate and passage of important new laws in the areas of constitutional reform, judicial reform, and financial sector reform are urgently needed to support the pace and sustainability of economic growth.
Other Donors
Overall development assistance to Mozambique totals about $500 million per year, excluding debt relief. The United States is the largest bilateral donor in Mozambique, providing over $76 million in grants and food aid in FY 2000 and $132 million in supplemental flood reconstruction grant aid between July and December 2000. Other major contributors include the World Bank, the International Monetary Fund (IMF), the United Nations, the European Union, the Netherlands, Sweden, Denmark, Switzerland, Italy, France and Norway. Portugal, South Africa and the United Kingdom are major investors in private enterprises in Mozambique.
FY 2002 Program
The USAID program will continue to focus on the agricultural provinces in north-central Mozambique, which have 55% of the country's population. Democracy, private sector, health and HIV/AIDS programs are national in scope.
Income growth will stimulate on-farm investment and expand rural enterprises. In FY 2002, USAID will continue its programs to rehabilitate farm-to-market roads, expand farmer business associations and rural enterprises, and increase the capacity of the Ministry of Agriculture to provide core public services. The contributions of P.L. 480 Title II-generated local currency in support of food security and sustainable agriculture will continue to be crucial to this program. USAID will continue to support the multidonor sector investment program to enhance the effectiveness of public sector support for private sector-led agricultural development, as well as a major new program effort to expand commercial financial services to more rural areas.
In the democracy and governance area, USAID will continue programs to build the capacity of the national legislature; develop civil society advocacy; develop more effective judicial processes; and strengthen political dialogue through public debate and party development.
In the health sector, USAID will continue to build the local capacity of both public and non-governmental institutions to provide sustainable access to basic services, especially those related to child survival, malaria, polio immunization and family planning. The program to combat HIV/AIDS will expand throughout the country, with an emphasis along the Maputo Corridor, a major transit line linking South Africa with the region, where infection risk is growing rapidly. Activities will be implemented through an important alliance between a major Mozambican non-governmental organization, a U.S. foundation and USAID.
USAID will continue to support private sector-led growth and development, building the capacity of business associations to work with the government and the legislature to develop trade- and investment-friendly regulations. This program covers major tax, tariff, and trade reform, and support the establishment of a nongovernmental alternative dispute resolution system designed to relieve an overburdened civil court system and address contract disputes. Activities to promote improved communications and access to information in Mozambique will continue, with coverage expanding to provincial capitals and other cities.
Activity Data Sheets
- 656-001, Increased Rural Household Income in Focus Areas
- 656-002, Government And Civil Society Are Effective Partners In Democratic Governance at the National and Local Levels
- 656-003, Increased Use of Essential Maternal and Child Health and Family Planning Services in Focus Areas
- 656-004, Improved Enabling Environment for Private Sector-Led Growth and Development
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Last Updated on: May 29, 2002 |
