Mozambique is an economic success story in sub-Saharan Africa (SSA). Its remarkable achievements offer valuable lessons to other low-income countries in a post-stabilization economic phase, including how they can efficiently manage a scaling up of foreign aid aimed at poverty reduction. Of special interest to other sub-Saharan countries are the book's discussions of Mozambique's progress toward consolidating macroeconomic and financial stability, and the challenges it faces in ensuring long-term sustainability, creating a virtuous cycle of natural resource use, and implementing second-generation structural reforms to sustain its growth. This book also provides a summary of the most recent research on issues related to post-stabilization economics in SSA.
“The United States and other donor nations should provide substantially greater economic assistance on terms that are more flexible and responsive to the priorities set by Africans themselves,” urged Nelson Mandela, former president of South Africa and former head of the African National Congress, on May 16 at the Brookings Institution in Washington, D.C.
International Monetary Fund. External Relations Dept.
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Deepak Mishra, Mr. Ashoka Mody, and Antu Panini Murshid
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International Monetary Fund. External Relations Dept.
This paper reviews the development of Iran under the IMF’s assistance. Iran has made considerable use of the IMF’s resources. It joined the IMF in 1945 with an original quota of US$25 million. The quota has been periodically raised and this year reached US$125 million. Total purchases from the IMF by Iran have amounted to US$121 million, and repurchases now total US$107 million, the last transaction being a repurchase of US$3.5 million in July 1965. The World Bank has lent more to Iran than anywhere else in the Middle East.
Mozambique is a success story in sub-Saharan Africa. It has benefited from sustained large foreign aid inflows, strong and broad-based growth, and deep poverty reduction. Since its civil war ended in 1992, Mozambique’s growth record has been impressive, and its growth has especially benefited the poor: consumption among people below the poverty line has grown strongly, thanks to an expanding agricultural sector, increased nonfarm activities in rural areas, and higher wages. Today, Mozambique has one of the lowest levels of income inequality in Africa, and its absolute poverty and the poverty gap (which takes into account the distance separating the poor from the poverty line) have decreased substantially. (See Figure 1.1.) This remarkable growth performance was made possible by prudent macroeconomic policies, structural reform, and substantial donor assistance. On the political side, Mozambique has succeeded in bringing about reconciliation and solidifying its nascent democracy through three general and presidential elections.1
Mozambique has experienced impressive economic growth over the past decade. GDP growth has averaged about 8 percent a year, which compares favorably with the growth takeoffs of Indonesia, Malaysia, the Philippines, and Thailand (the four members of the Association of Southeast Asian Nations referred to in this book as the ASEAN-4) and other Asian countries in the mid-1970s (see Chapter 1).
Mozambique has been remarkably successful in reducing poverty over the past decade. Sustained, broad-based growth resulted in a 25 percent decline, equivalent to 4 percentage points a year, in the poverty head-count between 1996 and 2002. Mozambique’s impressive poverty reduction performance was driven not only by the high rate of economic growth but also by the character of this growth. At the macro level, achieving growth without an increase in inequality was key, since this allowed a modest private consumption growth to efficiently reduce poverty, leaving room for a strong increase in investment to generate future growth. At the micro level, broad-based, labor-intensive growth in the nonagricultural sectors diversified household incomes, which underpinned the pro-poor growth performance. This chapter draws lessons on the linkages between growth and poverty reduction and analyzes the major factors associated with poverty reduction in Mozambique during 1996–2002. It uses both macro-level and nationally representative expenditure and income household survey data to illustrate those relationships in recent years and project future performance. The case of Mozambique also offers important lessons for other low-income sub-Saharan African countries, and we summarize these in our conclusions.
The question of how to achieve rapid and sustained growth has challenged economists for generations. As Robert Lucas (1988) has famously remarked, “the consequences for human welfare involved in questions like these are staggering: once one starts to think about them, it is hard to think about anything else.” The potential contribution of economic growth to well-being has been demonstrated by the achievements of various East Asian countries over recent decades. At the same time, it is patent that not all countries have been able to replicate these successes, with economic performance in sub-Saharan African countries being of particular concern. The World Bank, for example, remarks that global poverty is increasingly coming to assume an African face owing to the “slow and erratic” rates of economic growth across the continent over the last thirty years (Ndulu, 2007). Thus, although experiences of individual countries have been diverse, the importance of understanding what may be required to promote robust economic growth in Africa cannot be overstated.