Poverty Profile Mozambique (Executive Summary) October 2007 Japan Bank for International Cooperation

Transcription

1 Poverty Profile Mozambique October 2007 Japan Bank for International Cooperation

2 Chapter 1 Poverty in Mozambique 1.1. Measuring of Poverty and Inequality Poverty lines for Mozambique are defined and monitored by the Ministry of Planning and Development (Ministerio da Planificação e Devenvolvimento, MPD). Since the measurement of poverty lines is based on data obtained from the National Household Surveys of Living Conditions (Inquérito aos Agregados Familiares, IAF), which are undertaken every five years by the National Statistics Institute of Mozambique (Instituto Nacional de Estatistica, INE), this report bases its analyses on the same data. This report also refers to poverty analysis papers published by the World Bank in 2005 and Poverty Line The Action Plan for the Reduction of Absolute Poverty ( ) (PARPA II: Programa de Ação para Redução de Pobreza Absoluta II ) defines poverty as the impossibility or inability for individuals, families and communities to have access to the minimum basic conditions, according to the society s basic standards. The total poverty line is defined as an aggregation of a food and a non-food poverty line by the Cost of Basic Needs Approach. A food poverty line is calculated based on the average per capita per day caloric requirement, which is approximately 2,150 kilocalories. There are separate poverty lines for urban and rural areas of each province and Maputo City, set at prices raging from 5,473 meticals to 18,296 meticals. The poverty lines for Maputo City and Maputo Province, which are exceptionally higher than in other provinces, indicate that the cost of attaining the minimum caloric intake per day in those areas is considerably high Poverty Using the international poverty line, defined as the proportion of the population living below one dollar per day, as the measure of poverty rates, the rate for Mozambique is 29 percent, which is comparatively lower than the average of 49 percent for Sub-Saharan Africa. The poverty rate for Mozambique, estimated with the national poverty line, was 54.1 percent in 2003, with a decline of 15.3 percentage points from 69.4 percent in The national poverty gap ratio as well as the national squared poverty gap ratio declined during , indicating that income disparity among the poor has been decreasing. Analysis of the difference between urban and rural poverty rates shows that urban poverty rates were 51.5 percent (approximately 3.3 millions) and rural poverty rates were 55.3 percent (approximately 6.6 millions) in While rural poverty rates have declined remarkably since 1997, a majority of the poor is still concentrated in rural areas. At the provincial level, poverty rates as of 2003 were remarkably high in Inhambane Province (80.1 percent), followed by Maputo Province (79.1 percent) and Gaza Province (59.7 percent). This means that provinces in the southern region exhibit higher poverty rates. The absolute number of the poor is comparatively large in such provinces as Nampula and Zambezia. A provincial analysis of the evolution of poverty during indicates that poverty rates declined in eight provinces out of ten. Poverty rates declined remarkably, especially in the central region (Zambezia, Tete, Manica and Sofala Provinces), by 28 percentage points, and in the northern region (Nampula, Cabo Delgado and Niassa Provinces), by 11 percentage points. The central and northern regions include provinces with higher rural poverty rates. In the southern region (Inhabmane, Gaza and Maputo Provinces), on the other hand, poverty rates are slightly increasing due to the deterioration of urban poverty rates. According to PARPA II, factors that contribute to the poor performance of poverty reduction in the South include the effects on agricultural production of natural disasters such as floods and droughts. 1

3 Inequality The Gini coefficients at the national level slightly increased from 0.40 in 1997 to 0.42 in 2004, indicating that the inequality level has deepened. While the Gini coefficients remain stable in rural areas at 0.37, the index slightly increased in urban areas from 0.47 to At the provincial level, the Gini coefficients increased from 0.43 to 0.47 in the South and, especially in Maputo City, from 0.44 to These increases are statistically significant. Deterioration of the inequality level in Maputo City ensues from an increase in expenditure of the rich and a decrease in expenditure of the poor. It can be seen that living standards of the poor have further declined. In addition, the existing analysis of increased inequality during has revealed that inequality within urban areas, rural areas, and in each province is higher than that in the between-group gap, including the rural-urban gap and gap between provinces Poverty in Non-economic Dimensions Access to Basic Infrastructure Research on access to basic infrastructure by the poor shows that access to safe water and sanitation facilities, including latrines, improved during Differences in access to basic infrastructure between each consumption quintiles are less significant than regional disparities between urban and rural areas. A detailed analysis of access to safe water illustrates that, while distance to the water source has reduced at the national level, there is a serious urban-rural gap rural access is less than half of urban access. If we consider access to safe water by water sources, we find that access for the poor to rainwater and water from unprotected springs is 23.8 percent in urban areas and 52.4 percent in rural areas. Access to electricity for the poor as well as the non-poor is at an extremely low level throughout the country Employment Approximately 80 percent of the poor make their living mainly by agricultural activities. The proportion of people employed in the agricultural sector, however, slightly declined during , and, alternately, the ratio of trade and services moderately increased. Poverty rates of workers engaged in the sectors of agriculture, fishery and public administration are comparatively higher both in urban and rural areas. Furthermore, the poor engaged in the above sectors also have such commonalities as a lower income standard and higher income inequality than in other sectors. Analysis of types of employment contract indicates that lower quintiles have a lower percentage involved in wage labor and a slightly higher percentage involved in self-employment and casual labor than the top quintile. According to the Labor Force Survey, the unemployment rate is higher in urban areas than in rural areas, while the semi-unemployment rate is slightly higher in rural areas than in urban areas. The limited opportunities for formal employment in rural areas can be considered a major factor. The unemployment rate for women is higher than that for men both in urban and rural areas. In rural areas, a majority of women deal with the agricultural sector, accounting for 79 percent of the total. In particular, more than 90 percent of poor women are involved in agriculture. Analysis by age group illustrates that young adults under the age of 40 are more inclined to be unemployed than other age groups. It is important to expand employment opportunities, targeting women and young people along with others. 2

4 Education During , enormous progress has been made in increasing enrollment rates for children of primary and secondary school age, especially of the poor, in all quintiles of consumption. Net enrollment rates both of boys and girls in the poorest quintile have rapidly increased. It can be concluded that access to education for the poor has been improved. On the other hand, net enrollment rates for secondary education remain poor across the country, and, thus, an improvement in access to secondary education is required. While access to primary education has improved, much action must be taken to improve the quality of education and diminish gender, economic and regional inequality. Net primary enrollment rates are as low as 39.1 percent for girls in the poorest quintile, compared to 51.6 percent for boys in the same quintile and 87.4 percent, which is almost double, for girls in the richest quintile. This signifies the existence of gender and economic gaps in enrollment in primary education. The existence of regional disparity can also be observed in the fact that the net enrollment ratio of primary education is 48.1 percent in rural area, compared to 75.0 percent in urban areas. The literacy rate for girls in the lowest quintile is abysmal, at 12.2 percent. The repetition and drop-out rates of the poor tend to be higher than those of the rich. Results of national surveys, including IAF, indicate such problems as a lack of materials and inadequate facilities, along with less motivation to study. It is essential to consider measures in both aspects Health In 2003, the urban average of the total fertility rate was 4.4, compared to the 6.1 of the rural average, which had increased from 5.8 in The total fertility rate of the poorest quintile is 6.3 on average, compared to 3.8 in the richest quintile, indicating that poorer households tend to have a larger number of children. During , the under-5 mortality rate and the infant mortality rate improved in all consumption quintiles. The under-5 mortality rate especially declined in rural areas. Significant inequality is, however, still recognized between urban and rural areas, and between the rich and the poor. The main cause of infant mortality is death at birth. This can be attributed to malnourishment of pregnant women and to births without the attendance of skilled health personnel. The percentage of women attended by skilled personnel during childbirth is more than 80 percent in urban areas, compared to only 34.1 percent in rural areas and 24.8 percent in the poorest quintile. For HIV/AIDS, Mozambique remains one of the 10 most affected countries in the world. It is necessary to provide programmes on HIV/AIDS prevention education targeted towards poor women, due to the low rate of HIV/AIDS diagnosis during pregnancy and because of insufficient knowledge about prevention of HIV/AIDS. Investigations of perceptions of health services reveals that distance and transportation to medical facilities as a physical aspect, and cost problems for receiving treatment as an economic aspect, are cited as major constraints for the majority of the poor in using health care services. The overall improvement in health outcome indicators for the poor can only be limited if there is only enhancement of access to health facilities as mentioned, above without the betterment of the residential environment, including access to safe water and an elevation in the education standards of women. 3

5 1.3. Determinants of Poverty in Mozambique Key Factors of Poverty at Household Level In Mozambique, the proportion of food expenditure to total expenditure in poor households declined during It can be seen that the number of households with a certain amount of money to spare has increased. In urban areas, especially in Maputo City, however, there are still malnourished households with inadequate food access, since these households are suffering from a painful situation in their household economies due to high prices for food and increases in utility expenses. In the case of the rural poor, crop income accounts for a majority, at approximately 80 percent, of their household income. Although the proportion of crop income of the poor to some extent reduced, while the proportion of non-agricultural income increased during , the percentage change was not as large as for the rich. According to multivariate regression analysis by the World Bank, households with the characteristic of high proportions of under-14 children are more likely to be poor regardless of region. Households with the following characteristics are rather likely to be non-poor: household heads with primary or further and higher education and household heads working mainly in the non-agricultural sector. One of the determinants of poverty in rural areas is containing a higher proportion of disabled adults in a household. Statistically, a significant link between female-headed households and poverty was not confirmed by the 2003 survey data. Reduction of gender inequality in Mozambique is, however, largely lagging behind neighboring countries, and access by women to employment opportunities and education is less than that by men. It can therefore be expected that a certain characteristic of female-headed households is related to poverty. According to the World Bank, the following are included in the socially vulnerable groups of particular concern: the elderly; the physically and mentally disabled; the chronically ill; orphaned or abandoned children; widows; single women with children Key Factors of Poverty at Regional and Provincial Levels In 2004, the Mozambique Human Development Index (HDI) by UNDP was and ranked ground-level as 168 th among 177 countries, the worst of the seven countries of southern Africa. When HDI is calculated by province, it varies remarkably across provinces from to In comparison with provincial poverty rates, lower HDIs are mainly observed in the North, with higher HDIs in the South. HDI is a weighted sum of indices covering economic indicators such as per capita GDP and social indicators such as life expectancy and educational attainment. It is, therefore, thought that the discrepancy in regional trends identified above between HDI and poverty rates can be attributed mainly to a difference in social indicators. Agricultural growth had a direct effect on the improvement of the provincial economic indicator (per capita consumption expenditure) during and, thus, on poverty reduction. Poverty rates have fallen remarkably in the Center and the North, where agriculture is a major industry and production increases were highest. Analysis of social outcome indicators illustrates that the south Inhambane, with high poverty rates, exhibits a comparatively high literacy rate of girls, and that social indicators are poor in Zambezia Province in the Center, in spite of its comparatively low poverty rates. Moreover, the Northern provinces generally show poor performance in social indicators. Provinces with more land mines are especially inclined to have low social indicators, implying that the impact of the civil war is as one of the factors of regional inequality in the indicators. While agricultural growth is an important factor in poverty reduction, it is essential, from the long-term point of view, to accelerate employment and income creation for non-agricultural activities in each area. Each region has different factors determining poverty, which intricately 4

6 entangle each other. It is, therefore, essential to make a careful analysis at provincial or district level in terms of social background and poverty reduction, in order to determine a specific approach for assistance on poverty reduction Key Factors of Poverty at National Level (1) Determinants of Chronic Poverty In Mozambique, the urban annual population growth rate was 4.33 percent during , which higher than the Sub-Saharan Africa average of 3.61 percent. Provision of employment opportunities in the formal sector is not keeping up with population growth in urban areas. Consequently, the majority of the poor are obliged to participate in informal economic activities. According to the INE s survey in 2004, 75.2 percent of the working population of approximately million is estimated to be absorbed in informal economic activities. Analysis of the distribution of informal employment indicates that, by sex, women represent approximately 52 percent of the total informal employment in the country, which is slightly higher than men, while by age, young adults under 35 comprise a majority. By sector, agriculture accounts for approximately 70 percent in all urban areas at the country level, compared to Maputo city where trade, tourism and other services are the main industries absorbing informal employment. In urban areas, 70 percent of informal employment is self-employment and the remaining 30 percent consists of informal employees. Participation in the informal sector provides a lower and unstable income and almost no access to social protection for laborers. The following can be considered as policy implications for mitigating the problems of informal employment: expansion of stable employment opportunities with special attention to poor young people and women; support for the management of business including training in business management and vocational training. In rural areas, the majority of the poor earn a living as small-scale farmers or as agricultural laborers. Since they mainly rely upon rain-fed cultivation of staple food crops, their productivity is remarkably low. Increase in yields per unit area and production of value-added crops would result in an improvement in agricultural income. In order to achieve such an improvement, it will be necessary to enhance access to technical support services, along with information on agricultural crops and credit. Increase in income for the poor can also accrue from promoting an expansion of the agricultural products processing industry as a non-agricultural economic activity. It is, therefore, necessary to develop alternative industry and to strengthen the training of personnel to the benefit of the poor. Existing studies reveal that, in rural areas, poverty reduction cannot be sufficiently realized by the exclusive construction of economic infrastructure. It is, therefore, crucial to develop infrastructure with an integrated approach for the economic and social aspects. (2) Determinants of Transient Poverty: Risks and Vulnerability Mozambique is seriously vulnerable to natural hazards and frequently affected by a lack of food supply, caused by natural disasters such as droughts and floods. Natural disasters can be described as a major determinant of transient poverty in Mozambique. In particular, the central and southern provinces are apt to face the problem of unstable food supplies. The drought and famine during affected millions of rural people. At the time of the drought, approximately three million farmers were affected. The drought in 2001 caused a reduction in maize and beans production in Maputo, Gaza and Inhambane Provinces. Moreover, flooding along the Zambezi River in the same year inflicted a loss to the amount of 77,000ha of farmland in the central provinces of Zambezia, Sofala, Manica and Tete. Extended damage from such natural disasters can be a determinant of chronic poverty. 5

7 In Mozambique, the HIV infection rate in recent years has been increasingly the focus in terms of the impact of HIV/AIDS on poverty. While the region with the highest infection rate is the Center, the rate in the North is also deteriorating. It appears that death amongst the working age population, through HIV/AIDS infection, directly results in reductions in household income and increases in the number of widows and orphans. It also affects indirectly rural areas where traditional knowledge associated with locally adopted crops and seed management are not passed on, which can cause a reduction in income due to the decrease in agricultural productivity. 6

8 Chapter 2 Poverty Reduction Efforts and Performance of the Government of Mozambique 2.1. Policy Framework for Poverty Reduction General Conditions Following independence from Portugal in 1975, Mozambique was established as a socialist state. Nevertheless, damage caused by civil war and failure in the farm collectivization policy later obliged Mozambique to enter a process of ideological change. In 1984, Mozambique became a member of the IMF and the World Bank Group, aiming at transition to a free market economy. Definite actions taken by the Mozambican government included development of the Economic Rehabilitation Program (ERP) in 1987 and the Social and Economic Rehabilitation Plan (PRES) in 1990, under which the Government implemented the Structural Adjustment Program which included economic liberalization, deregulation and privatization. In October 1992, the government of Mozambique signed a peace agreement, putting an end to a prolonged civil war. In 1994, the country held a presidential and parliamentary election, and Joaquim Chissano was elected as president, confirming the Front for the Liberation of Mozambique (FRELIMO) as the ruling party. This shows that Mozambique has made a step forward in the democratization process. During the 1990s, there was a considerable influx of foreign aid and foreign direct investment into mega-projects. The trend of economic growth was also favorable, in spite of damages caused by drought in 1992 and 1995, which temporarily disrupted the steady economic growth rate. The annual economic growth rate for the ten years from 1997 to 2006 was 8.6 percent per annum. While inflation convergence attained a single-digit annual rate in the late 1990s, the rate increased to above ten percent in While the current account deficit is continued, the deficit as a share of GDP has been declining owing to remarkable economic growth with GDP expansion, from 22 percent in 1992 to 10 percent in As for economic structure of Mozambique, while the agricultural sector accounted for more than 30 percent of GDP as of 1996, the proportion had fallen to a level below 20 percent in The services sector represents the largest share of GDP. The proportion of services further increases every year, and reached 54 percent in The share of the industrial sector to GDP is also inclined to expand. This increased 10 percentage points during ten years from 1996 to 2005, and reached 26 percent in 2005, which is higher than the agricultural sector Development Plans and Poverty Reduction Strategies Following conclusion of the peace agreement, the National Development Plan (Programa de Governo) was developed for the first time in Since then, three five-year plans have been formulated up to the present time. These plans consistently include poverty alleviation, reduction of regional inequality and maintenance of peace as development agenda, and education, health, agriculture, rural development and development of infrastructure as priority sectors. The Mozambican government announced the Strategy for Poverty Reduction in Mozambique in 1995 and Action Guidelines for Eradication of Absolute Poverty in April 1999 as strategies for poverty reduction. The government subsequently developed an Action Plan for the Reduction of Absolute Poverty ( ) (PARPA I) in April 2001 through consultation with international donors. PARPA I focused on education, health, agriculture and rural development, basic infrastructure, good governance and macro economy and financial 7

9 administration. Furthermore, based on the findings of the analysis of the process of the first five-year plan, Agenda 2025 was publicized in June 2001 and encompassed the long-term vision and guidelines for national development, while asserting the importance of the fight against poverty/poverty alleviation. PARPA II ( ) was prepared in 2006 reflecting the execution of the IAF survey (2003) and its subsequent analysis. Fundamentally, this continues the priorities of PARPA I, while increasing the focus on reform for rural-based development. PARPA II set out as its key objective poverty reduction by redistributing resources, and focused on stabilization of the macro economy and diagnosis of poverty determinants. PARPA II is organized around three main pillars; governance, human capital and economic development, and defined gender, HIV/AIDS, the environment, food and nutritional security, science and technology, rural development, natural disasters and de-mining as eight cross-cutting topics. Moreover, PARPA II estimated target figures that could be allocated to each sector as capital expenditure. According to the estimates, expenditures on general and technical education as well as health and HIV/AIDS account for the largest proportion, at around percent each, followed by roads and highways for which percent is allocated. In comparison with PARPA I, the allocation to roads and waters had increased. Based on the government s five-year plans and PARPA, sectoral and provincial strategic plans and the Medium Term Fiscal Framework (CFMP) as 3 to 5 years medium term plans, have been elaborated. In addition, the Economic and Social Plan (PES) and the State Budget (OE) have been developed as annual plans for the above-mentioned medium and long term plans Sector Strategies Agricultural Sector Since the agricultural sector is identified as the major industry for rural areas with high poverty rates, it is one of the priority sectors in both PARPA I and II. With augmentation of aid from international donors to the agricultural sector in 1990s, new schemes such as pool funding and program-based approaches have been introduced into agricultural public investment. Since 1999, the National Agricultural Development Program (PROAGRI) I and II, a comprehensive sector wide program for supporting the agricultural sector, has been implemented. The main components of the program are: (i) structural reform and modernization of the Ministry of Agriculture; (ii) improvement of the effectiveness of public support services provided by the Ministry of Agriculture, for agriculture, livestock, forestry and others; and (iii) support for related sectors including the development of roads and other transportation infrastructure and improvement of the financial system. In addition to agricultural sector development, the government has been making efforts to achieve poverty reduction and food security, announcing the National Food Security and Nutrition Strategy in 1998 and the Action Plan for Food Security and Nutrition in Water Sector In 1995, the Mozambican government approved the National Water Policy as a fundamental policy document for the water sector, which professes an expansion of basic water and sanitation services. In accordance with this policy, projects such as the First National Water Development Project ( ) and the Second National Water Development Project ( ) have been implemented. It was expected, especially for the urban water sector, that these projects would support the establishment of the Water Supply Investment and Asset Fund (Fundo de Investimento do Património do Sector de Águas, FIPAG) in the five major cities and create more efficient and self-supporting programs of water service provision through engagement with the private sector. As for rural water supply and sanitation services, on the 8

10 other hand, the establishment of implementing agencies at the district and local levels was expected, in response to the decentralization process. PARPA II defined an outcome target of the proportion of population with access to water at 53 percent both in urban and rural areas by Road Sector In the road sector, the Road and Coastal Shipping Project (ROCS) ( ) and the Roads and Bridges Management and Maintenance Program (RBMMP) ( ) have been implemented. In June 2006, the government approved the Road Sector Strategy (RSS) ( ) in line with the above-mentioned programs. Moreover, the National Road Administration (ANE), in charge of the major road network, executes labor-based road construction programs, aiming at employment creation for local poverty reduction. The program applies the gender sensitive criteria that 25 percent of employees should be women. Education Sector The government announced the National Education Policy in 1995, in which the main goal was defined as quality education for all. Under the policy, the Education Sector Strategic Plan (ESSP) ( ) and ESSP II ( ) have been executed with the following three objectives; expansion of access to basic education throughout all regions of Mozambique ; improvement of the quality of education services ; and the strengthening of institutions and the administrative framework for the effective and sustainable delivery of education. One of the main objectives of PARPA II, approved in May 2006, is also to guarantee quality education for everyone, with special attention to primary education. A specific aim of PARPA II is to increase the participation of girls and orphans in all kinds of educational opportunities and to reduce the high rates of illiteracy among men and women, young people and people with disabilities, especially in rural areas. Specific targets to be achieved by 2009 are as follows; net primary enrollment rate (both EP1 and EP2) of the first and second levels) to 93 percent (result of 83 percent in 2005); net primary enrollment rate for girls aged six to 80 percent (result of 56 percent in 2005); completion rate for the second level of primary education (EP2) for girls to 50 percent (result of 28 percent in 2005); and illiteracy rate to 43 percent (result of 53 percent in 2004). Health Sector In 2001, the Strategic Plan for the Health Sector (PESS) (2010) was developed as the first health sector policy, being coherent with PARPA I, and with the vision to promote and preserve the health of the Mozambican people through access to health care that will become accessible to all Mozambicans. The health sector was also regarded as important in PARPA I for the development of human resources, and especially for poverty reduction. The backbone of the health sector strategy is specifically placed under the ambit of a strategy for Primary Health Care (PHC). Government intervention has given special attention to the needs of high-risk groups such as women of reproductive age, children, personnel in rural areas, and those living below the poverty line. With regard to HIV/AIDS, the government is making considerable efforts, including approval of the HIV/AIDS National Strategic Plan ( ) in PARPA II also maintains priority status for the health sector, indicating that the coverage of health care services should be expanded, paying special attention to the poor and vulnerable groups. PARPA II states that provision of quality health services should be ensured as a priority. Specific targets to be achieved by 2009 are as follows; infant mortality rate to 140/1,000 (result of 178/1,000 in 2003); maternal mortality rate to 340/100 thousand (408/100 thousand in 2003); and infection rate of malaria for under-5 children to 44/10 thousand (result of 55/10 thousand in 2003). 9

11 Fiscal Framework and Public Expenditure for Poverty Reduction Analysis of the fiscal status of Mozambique shows that the country has been consistently facing deficits both in current and overall balances. The current account deficit was 124 billion metical in 1999 and 151 billion metical in It has, however, rapidly increased after 2001 and amounted to trillion metical in The overall balance of payments deficit expanded to trillion metical in 2001, more than double the 1999 deficit of trillion metical, and has remained at a high level since. Analysis of the ratio of government expenditure to GDP indicates that, while current expenditure stagnates in the range of percent of GDP, capital expenditure showed a peak of 15.4 percent in 2001 and was reduced to the low level of less than 10 percent in Public investment has consistently increased from 1999 to 2004 and amounted to over 30 trillion metical. In PARPA II, the government announced a target of allocating 65 percent of the budget to PARPA II priority areas. The allocation of more than 60 percent to PARPA II has been achieved since Capacity of the government for Poverty Reduction During the development process of PARPA, the Ministry of Planning and Development undertook consultations with other related ministries, international donors and the civil society, and obtained their consensus. A matrix named the Performance Assessment Framework (PAF) was also designed for monitoring the implementation of PARPA. Since 2003, a consultative forum called the Poverty Observatory has been held with the enrollment from the civil society at the time of the annual review meeting for PARPA during April and May. For the improvement of governance, the government approved a Global Strategy for Public Sector Reform indicating long-term policy on public sector reform, based on which Public Sector Reform Program (the first phase : , the second phase: ) has been implemented. Furthermore, under PARPA II, decentralization, and reform of the justice system, the public order and the rule of law are promoted Progress of Poverty Reduction Achievement of MDGs Assessment was made of the progress of Mozambique towards achieving the set of eight Millennium Development Goals (MDGs) and the likelihood of target attainments by For this purpose, references were made to the Report on the Millennium Development Goals 2005 (hereinafter referred to as MDGs report ), prepared by MPD of the Mozambican government in cooperation with the United Nations, and the MDG Country Table developed by the World Bank. Goal 1: Eradicate extreme poverty and hunger For the alleviation of extreme poverty and hunger, it is judged that Mozambique has some potential to achieve this goal, since all of the poverty indicators have improved. In particular, the proportion of the population living under the national poverty line declined from 69.4 percent in 1997 to 54.1 percent in 2003, representing a reduction of approximately 15 percentage points. This means that Mozambique has already achieved the target established in PARPA I that envisaged a reduction in poverty to 60 percent by 2005, and that Mozambique is on track to achieve a target of 44 percent in 2015 when extrapolated from the current trend. The poverty gap ratio, which measures inequality among the poor, also registered an 10

12 improvement of around nine percentage points during the same period. The level of consumption of the poor has, however, decreased compared to that of the rich, indicating that economic inequality is inclined to expand. The share of consumption of the poorest quintile (i.e. the poorest 20 percent of the population) declined from 6.5 percent in 1997 to 6.1 percent in 2003, while the share of consumption of the richest quintile (i.e. the richest 20 percent of the population) reached above 50 percent. Goal 2: Achieve universal primary education For net enrollment ratio in primary education, the MDGs report summarized that, in spite of appropriate interventions by the government, the net enrollment rate and the completion rate of primary education were 69.4 percent and 38.7 percent each in Thus, it is unlikely that Mozambique will achieve 100 percent of the target by 2015, without substantial investment of human capital and funds. Goal 3: Promote gender equality and empower women For the indicators of education opportunities, out of four targets for gender equality, there was an improvement in the gender gap in enrollment at EP1 level. The ratio of young literate females to males (ages 15-24) increased from 0.62 percent in 1997 to 0.83 in Gender equality in employment and politics has also improved. Goals 4-6: Reduce child mortality, Improve maternal health, and Combat HIV/AIDS, malaria and other diseases As for health-related indicators, the under-five mortality rate and the infant mortality rate declined during Achievement of the target by 2015, however, will require further efforts. While there was a decrease in the rate of maternal morality, the prevalence of HIV increased from 8.2 percent in 1998 to 16.2 percent in Goal 7-8: Ensure environmental sustainability, Develop a global partnership for development Among access to infrastructure services, access to water deteriorated from 37.1 percent in 1997 to 35.7 percent in The indicators of sanitation facilities, telephone subscribers and internet users have remained at a low level, although they are all improving Economic Growth and Poverty Other studies have concluded that, while economic growth was a major contributor in reducing poverty in Mozambique between 1997 and 2003, the inequality level among income quintiles has been worrisome. PARPA II presented the result of a simulation analysis of the relationship between the economic growth rate and the reduction of poverty rates. According to the result, with a scenario based on an annual rise of two percent in the economic growth rate, poverty rates would decline to percent in 2009, and an annual rise of five percent of economic growth rate would decrease poverty rates to percent. These scenarios, however, could not be realized without improvement in income distribution to the poor. A study by the World Bank demonstrated the results of analysis, which disaggregates changes in the total poverty reduction during between changes in mean consumption (changes caused by economic growth) and changes in inequality (changes caused by distribution). According to the result, the impact of changes in mean consumption and changes in inequality on changes in poverty rates differs between rural and urban areas as well as among regions and sectors. It is, therefore, necessary to conduct a detailed examination of these factors and take measures not to offset the potential poverty reduction effects of economic growth, in order to achieve a further decline in poverty rates. 11

13 Chapter 3 Partnership for Poverty Reduction 3.1. International Donors According to the statistics on aid activities provided by the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), disbursements of net official development assistance (ODA) received by Mozambique were running at around 300 million dollars in the mid 1980s. During the 1990s, however, these increased to around 1 billion dollars and, in 2002, showed a peak of 2.2 billion dollars. Although they decreased again to 1 billion dollars in 2003, they held at the 1.2 billion dollars level in 2004 and The proportion of the net ODA disbursements to GNI was considerably high during the civil war, and reached a peak of 87 percent in This declined afterwards and remained at less than 30 percent during 1990s. While this once again increased to 56 percent in 2002, it is now running at a 20 percent level. This figure is higher than the average for Sub-Saharan Africa of 5.3 percent, indicating that Mozambique is one of the most aid-dependent economies among African countries. The state budget also has a heavy dependence on external aid, and the proportion of aid to the state budget amounted to 32 percent in 2004 and 30.8 percent in Analysis of distribution of the disbursement of net ODA to Mozambique shows that grant assistance accounts for the great majority. It also illustrates that ODA from DAC countries represented percent of the net ODA disbursements to Mozambique in 2005, with the World Bank, the European Commission (EC), the United States, the African Development Bank (AfDB), and Sweden as the major donors. Japan has been out of the top-ten donors since Analysis of sectoral distribution of ODA commitments to Mozambique by donor indicates that commodity aid / general program assistance accounts for the largest proportion of aid from Britain, Sweden and the EC (32 percent, 37 percent and 51 percent, respectively). Among donors which focus their ODA commitments on social infrastructure, Canada concentrates on education, Ireland allots a same degree of proportion to health, education, and government and civil society, Norway supports government and civil society while focusing on health, and the United States concentrates on population programs. Donors which distribute approximately 20 percent or more of their total ODA commitments to economic infrastructure in Mozambique are the AfDB (35 percent), the World Bank (IDA) (32 percent), Denmark (26 percent), Sweden (25 percent), and the EC (21 percent). Donors supporting energy with a certain proportion of their ODA commitments are Denmark (20 percent) and Norway (15 percent). In Mozambique, there has been a movement towards donor coordination since 1980s, mainly by the Nordic countries and Canada which were the major emergency food assistance donors. In 2001, the group of budget support donors primarily aligned themselves for more effective aid under the framework of PARPA, leading to the subsequent evolution of donor alignment and harmonization. As of July 2007, there exists a group of 19 general budget support donors, called the Program Aid Partners (PAPs). Since 2004, the Performance Assessment Framework (PAF) has been developed by PAPs as a monitoring mechanism of PARPA. Thus, the implementation and monitoring of PARPA are the responsibility of PAPs jointly with the Mozambican government. Meetings for these purposes are held periodically, while several sector working groups are held as often as needs arise according to sector. Non-PAPs donors also participate in the donor coordination framework which has been formulated mainly by PAPs initiatives. To ensure civic engagement in poverty monitoring, the Poverty Observatory (PO) has served as a consultative forum of partnership among the government, donors and civil society since 2003, with a technical secretariat located within the National Directorate of Planning and Budget (DNPO) of the Ministry of Planning and Development. Participants in the PO include 12

14 representatives from NGOs, the private business community, trade unions and regional groups, along with others Civil Society and NGOs According to the 2004 census conducted by the INE, there exist as many as almost 5,000 civil society organizations, including NGOs and community-based organizations, in Mozambique. Approximately 92 percent of these are associations of farmers, herders, artisans and so on. The remaining almost eight percent comprise national NGOs, international NGOs and non-specified organizations (3.1 percent, 3.9 percent, and 0.7 percent respectively). Approximately 75 percent of these civil society organizations function at local community or district level. No more than 7 percent are organizations with a national or international focus. The main target issues for NGO activities are poverty reduction, HIV/AIDS, gender (gender equality), supply of social services, democratization and anti-corruption, lobbying government, strengthening of civil society and so on. International NGOs are obliged to apply to the Ministry of Foreign Affairs and Cooperation for authorization to work in Mozambique. There is no umbrella NGO for inter-organizational coordination in Mozambique. There are, however, several nationwide and regional NGO networks as well as sector-wide networks for the areas of agriculture, environment, women and development and so on Private Sector In the water sector, with the approval of the National Water Policy in 1995, urban water supply services have been contracted out to private utilities in the cities of Maputo, Beira, Quelimane, Nampula and Pemba, so that the services can be provided at lower prices and to more local residents. Furthermore, the Mozal aluminum smelter project, one of the mega-projects that have driven the recent economic growth of Mozambique, contributed to the vitalization of the local economy and to poverty alleviation. Under this project, local suppliers and contractors were hired and 1,200 of the local workforce were employed during the construction phase. In addition, the project supported Corporate Social Responsibility (CSR) initiatives, under which workforce training opportunities were provided for technical improvement of affiliated companies, and poverty reduction activities were implemented directly for neighboring communities. As for small to medium scale private investments, some obstacles in the fiscal policies and complicated administrative procedures have been identified as hindering the enhancement of small and medium scale enterprises (SMEs) in Mozambique. The preparation of a business environment more favorable for investment in SMEs is therefore required. Aiming at private sector development in Mozambique, several donors such as the United States, Germany and Sweden are currently supporting Mozambique in improving the policy and legal environment and to promote technical development. 13