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Republic of Mozambique: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
September 2005
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I. Economic Growth and Poverty Reduction in Mozambique1

A. Introduction

1. Following the signing of a peace agreement in 1992 to end 16 years of conflict, Mozambique, a coastal country, has achieved impressive economic growth and lowered its prevalence of poverty. The government stabilized the macroeconomic environment, deepened economic liberalization, and implemented several institutional and structural reforms; for example, it liberalized the exchange and trade systems and reduced the involvement of the state in the economy. The Mozambican tax system was modernized and simplified and tax administration was strengthened while budgetary procedures and transparency improved during the period 1992-2004. The new environment attracted substantial private capital inflows (“megaprojects” in aluminum smelting, natural gas, and titanium mining, which resulted in a tripling of exports in three years) and the support of the international community (concessional assistance now accounts for half of government expenditures).

2. This chapter reviews Mozambique’s impressive economic growth and the effect of growth on poverty reduction over the past decade.2Section B briefly reviews the main aspects of its recovery postconflict and the composition of economic growth and its impact on poverty reduction. Section C uses a basic growth accounting framework to estimate the factors that are driving economic growth. Finally, Section D analyzes the primary challenges confronting Mozambique and the need for a new wave of reforms to foster growth and further reduce poverty.

B. Economic Recovery, Growth Composition, and Poverty Reduction

Economic recovery

3. On average, the Mozambican economy grew by 8.5 percent annually between 1996 and 2004, driven by new megaprojects, investment from neighboring countries, buoyant donor support, and agricultural growth. During this period, there was a remarkable agricultural “catchup,” and a fast expansion in tourism, construction, and manufacturing.

4. Much like other countries in the region—except Tanzania and South Africa, whose growth patterns are more stable—growth in Mozambique is somewhat volatile (Figure 1). Natural disasters (floods and droughts) that frequently plague the region explain the more severe swings. For example, the steep fall in the 1992 growth rates of Mozambique and Malawi was a consequence of the widespread drought those two countries experienced that year, floods in 2000 explain Mozambique’s low performance that year.3 Unlike other countries in the region, Mozambique has been successful in sustaining periods of high growth for the most recent years.

Figure 1.Selected Sub-Saharan African Countries: Real GDP Growth, 1985-2004

(Annual percentage changes)

Sources: Mozambican authorities; and IMF staff estimates.

Composition of growth

5. Mozambique’s economic growth implies an important transformation in the composition of its GDP, although services remain the dominant sector (about 48 percent in 2004). The share of industry in total GDP increased to 27 percent in 2004 from about 16 percent in 1996, whereas the share of agriculture decreased to 23 percent from about 30 percent in the same period (Figure 2). The agricultural sector, however, still supports 80 percent of the economically active population, whereas the service sector (including government) employs 15 percent of the workforce, with industry absorbing just 5 percent.

Figure 2.Mozambique: Composition of GDP, 1996 and 2004

(In percent of GDP)

Sources: Mozambican authorities; and IMF staff estimates

6. Investment, primarily supported by foreign direct investment in megaprojects, grew at an average rate of 11 percent during 1996–2004, higher than the country’s overall GDP growth rate (Table 1). The high rates of investment, especially after 1998, are mainly due to the megaprojects MOZAL I and MOZAL II (aluminum smelters) and the gas pipeline to South Africa. The megaprojects also explain Mozambique’s buoyant performance in exports, which grew at an average rate of about 29 percent during 1997-2004.

Table 1.Mozambique: GDP, Real Rates of Change in Percent, 1996-2004
1996199719981999200020012002200320041996-2004
average
GDP7.111.112.67.51.913.18.27.87.28.5
Private consumption17.27.15.94.6-0.31.50.24.45.05.1
Public consumption-6.321.021.010.011.717.23.611.415.911.7
Total investment-8.48.432.661.4-8.7-15.238.04.4-13.911.0
Exports of goods and nonfactor services22.88.610.4-1.531.951.621.030.213.120.9
Imports of goods and nonfactor services5.011.18.440.4-2.4-20.721.413.1-7.17.7
Sources: Mozambican authorities; and IMF staff estimates
Sources: Mozambican authorities; and IMF staff estimates

7. The industrial sector, comprising mining, manufacturing, electricity and water, and construction, was the main contributor to overall GDP growth during 1996–2004 (Table 2). In the service sector, high rates of growth in restaurants and hotels and in transport and communications also help to explain Mozambique’s GDP performance during 1996–2004. And, although the performance of the agricultural sector has been volatile, average growth during 1996–2004 reached 6.6 percent.4

Table 2.Mozambique: GDP, Real Rates of Change in Percent, 1992-2004(Averages by period indicated)
1992-961992-20041996-2004
Real GDP3.16.58.5
Sectoral growth rates
Agriculture total6.06.26.6
Fishing0.71.32.6
Industry5.616.422.5
Mining-0.132.044.1
Manufacturing1.411.017.2
Electricity and water4.932.045.6
Construction16.716.517.2
Services3.55.35.8
Commerce-1.12.33.9
Restaurants and Hotels16.212.310.8
Transport and communication17.811.98.5
Financial services2.64.75.0
Real estate rentals4.33.22.6
Corporate services4.16.0
Government services-1.83.86.5
Other services6.07.78.8
Sources: Mozambican authorities; and IMF staff estimates
Sources: Mozambican authorities; and IMF staff estimates

Industry and megaprojects

8. Growth in the dynamic industrial sector averaged about 22 percent a year. Mining and electricity and water grew by 45 percent, on average, while manufacturing and construction grew by 17 percent a year during the same period. The sector’s strong growth, like the growth in investments, was driven by the development of the megaprojects. Some manufacturing subsectors, led by processed food and beverages, also registered impressive growth during the period, whereas progress in textiles was less noticeable.

9. Megaprojects’ contribution to overall GDP growth has been decisive since 1997. Mozambique currently has three such projects—the MOZAL aluminum smelter, the Cahora Bassa hydroelectric plant, and the SASOL gas pipeline to South Africa.5 The share of megaprojects in GDP increased to 7 percent from zero during 1998-2002, and the contribution to GDP growth was about 1.6 percentage points annually during the same period.

10. The importance of megaprojects to GDP growth has waned since the completion of the MOZAL aluminum smelter and the SASOL gas pipeline in late 2003. However, they will continue to contribute to overall growth in the coming years, with the launch of a titanium ore project in 2004 that is expected to become operational. In addition, a feasibility study of a coal mine project will begin in 2005, and the project is scheduled to begin in 2007.6

11. Total export growth was also high during 1996-2004 at 29 percent on average and can be explained, in part, by exports from megaprojects. These grew at 90 percent, on average, in the same period. Traditional exports grew at the solid average rate of 9.8 percent during the same period. Traditional exports are concentrated in a few agricultural products—prawns, cotton, timber, raw cashew nuts, and sugar—whose production are weather-sensitive and subject to terms of trade shocks. In 2004, exports from megaprojects made up about 70 percent of total merchandise exports (Figure 3).

Figure 3.Mozambique: Composition of Exports (f.o.b), 1997-2004

(In millions of U. S. dollars)

Sources: Mozambican authorities; and IMF staff estimates.

Agriculture

12. Agricultural sector growth, which averaged 6.6 percent a year between 1996 and 2004, was lower than average overall GDP growth. The main contributors to growth were food grains (maize), sugar, tobacco, cashews, and cotton:

  • Food grain production represented a remarkable postconflict catchup, with annual growth averaging 6.6 percent from 1996 to 2004. About half of agricultural sector growth during the period was due to an expansion of land under cultivation. Growth in certain regions, such as Tete, has been stronger owing to regional trade—for example, cross-border trade in maize and other products with Malawi.
  • Sugar production also recovered, with private investors, mainly from Mauritania, attracted by the protection from foreign competition. These took the form of a surcharge on sugar imports, which rose from 50 percent in 2000 to 90 percent in 2003, as well as exemption from sales tax and investment incentives. Sugar production shot up to 212,000 tons in 2003, a level not seen since 1970.
  • Tobacco and tea production, which was consistently strong, was driven by commercial investment from Zimbabwean companies and farmers who have settled in Mozambique. Since 2002, tobacco production has grown, on average, by 67 percent, and tea production has risen by 20 percent a year.
  • Cashew and cotton production both recovered strongly after the conflict ended but the gains appear to have tailed off since 1998. The troubled cashew sector continues to stagnate, indicating that more needs to be done to overcome declining productivity and returns.

13. The deepening of market integration and the use of modern technology help explain the transformation of agriculture since 1996:

  • Market integration has played an important role in trade expansion, market participation, and employment of labor in rural areas. The northern, central and southern regions of the country, which had been almost completely self-sufficient as a result of high transport costs and poor communication, have become more integrated (beans from Niassa and groundnuts from Nampula, for example, have been found in Maputo). As a result, the prices of agricultural products have converged across subregions. Although still low, the number of households engaging in agricultural production for the market has increased slightly. The percentage of smallholders selling food crops to the market increased from 14 percent in 1996 to 26 percent (in the case of maize) in 2002. In the same period, the percentage of agricultural households that hired nonfamily labor rose from 18 percent to 22 percent.
  • Technological progress in the agricultural sector is more widely observed in the cash crop segment, whereas food crop production remains underdeveloped. Food crops are still rain fed, collected by hoe, and grown without fertilizer or selected and improved seeds. Tobacco farmers, however, have increased their use of fertilizer, an innovation introduced by Zimbabwean immigrants. Other cash crops (cashews and cotton) became more widespread between 1996 and 2004.

Services

14. Although the service sector has not kept pace with overall GDP growth on average during 1996–2004, it continues to be the largest sector, accounting for about 48 percent of GDP. Restaurants and hotels and transport and communications have registered a strong performance. The reestablishment of traditional markets such as tourism explain the performance of these subsectors, which grew on average, by about 11 percent and 8.5 percent, respectively during 1996–2004, while the service sector as whole grew by about 6 percent (Table 2). During the 1990s, the country regained a large number of South African tourists, and also started to attract tourists from elsewhere.

15. The expansion of ports and railways and of mobile telephony has attracted more private investment and explains the strong performance in transport and communications. Market liberalization of telecommunications is a good example of how macroeconomic policies and reforms have buttressed economic growth in Mozambique. As of 2000, the country had 85,000 landlines and 51,000 cell phones. The introduction of a cell phone competitor galvanized the incumbent market more effectively. Cell phone accounts had mushroomed to 700,000 by 2004, the quality of service had improved noticeably, and prices are now among the lowest in the region. As would be expected, given the expansion of educational, health, and other services, growth in the government sector has been also very high since 1996.

16. The expansion of commerce and financial sector activities in recent years has been disappointing. The pace of growth in commerce, for example, should have been more robust in light of Mozambique’s overall GDP growth. It is likely that some commercial activities, which have taken place in the informal sector, have not been captured in official statistics. A panel survey carried out during 2000–03 (the variable analyzed is sales rather than value added) for industry, construction, transport and communications, tourism, restaurants and services, and commerce, shows that growth rates in those activities and in the overall economy broadly correspond. Interestingly, the survey also shows stronger rates for growth in commerce than in the other sectors.7 The financial sector’s disappointing performance can be attributed to several crises in the sector in the past six years when banks had to be bailed out with a government’s package and further reprivatized, as was the case of Banco Austral in 2001.

Concessional assistance, growth, and poverty reduction

17. Mozambique is one of Africa’s largest recipients of aid, exceeding other postconflict countries, such as Uganda and Ethiopia. Between 1998 and 2004, Mozambique’s foreign grants and loans receipts accounted for 15 percent of GDP, on average, 70 percent of which was in the form grants—that is program, project, and in-kind grants (Table 3). During 1998–2004, total grants and loans averaged US$641 million dollars and were allocated mainly to the priority sectors defined in Mozambique’s poverty reduction strategy paper (PRSP) (PARPA in Portuguese).

Table 3.Mozambique: Grants and loans to the government, 1998-2004(In millions of U.S. dollars, unless otherwise indicated)
19981999200020012002200320041998-2004

(average)
Total grants313434561469374492467444
Program grants exc. special programs124218216171118171167169
Special programs2020292501513
Project grants134180195257222260143199
In-kind aid1915121202741936
Support for government imports (medicine, etc.)17002022113428
Total loans226112163104248214313197
Program loans87029311067110561
Project loans13911213450106116161117
Loans to public enterprises0002236274619
Total grants and loans (excluding IMF; and HIPC grants)539546724573622706780641
(in percent of GDP)13.613.319.515.515.214.812.815
Share of grants (in percent)58.179.577.581.960.269.759.970
Per capita32.732.542.132.534.438.141.136
Sources: Mozambican authorities; and IMF staff estimates.
Sources: Mozambican authorities; and IMF staff estimates.

18. Concessional assistance has, on the whole, been successful in broadening people’s access to, and the quality of, services and in raising the level of fiduciary accountability. The main sectors benefiting from external aid are agriculture, roads, education, and health.

19. Good progress has been made in recent years in reducing poverty. The poverty headcount, as measured by the national poverty line, fell from 69 percent in 1996/97 to 54 percent in 2002/03—from 71 percent to 55 percent in rural areas and from 62 percent to 52 percent in urban areas, which means that the PARPA goal of reducing the poverty rate to 60 percent by 2005 has already been achieved.

20. Other social indicators are also in line with this trend of poverty reduction: (i) the share of households owning a radio rose from 27 percent in 1997 to 49 percent in 2001; (ii) the share owning a bicycle rose from 12 percent to 27 percent in the same period; (iii) various sectoral indicators show that primary school attendance, vaccination coverage, and attended births rose considerably over 1996–2002; and (iv) several surveys in the agriculture sector indicate that the median income per capita from crops increased by 27 percent between 1996/97 and 2002/03.8

21. Government interventions and targeted priority expenditures—backed up by external aid—also played a role in poverty reduction. Increased trade allowed smallholder households to augment their incomes. Higher educational levels and increased access to education led to better earnings in the labor market and raised the productivity of informal sector operators while attracting high returns in rural nonfarm pursuits. Improved health raised the productivity of workers in all sectors.

22. Megaprojects have had a less significant effect on poverty because they generate a small number of jobs. Fiscal contributions have also been relatively small because of the high level of tax exemptions. The direct contribution of megaprojects to local employment has varied greatly depending on the phase of the project (under construction or operating). MOZAL, for example, representing the largest foreign direct investment in the country, employed about 5,000 people during its construction phase and about 1,000 subsequently. However, the fiscal contribution of megaprojects is estimated to rise to 3–4 percent of tax revenues by 2010.

23. Mozambique’s recent progress in reducing poverty broadly indicates a strong link between growth and poverty reduction. It is beyond the objectives of this paper to measure the magnitude of the elasticity between growth and poverty reduction in Mozambique, but the evidence available confirms what recent studies have shown for other countries: broad-based GDP growth is positively related to poverty reduction.

C. Sources of Growth

24. This section attempts to estimate the contribution of total factor productivity (TFP) and factor accumulation to GDP growth in Mozambique over the past few decades. A growth accounting framework based on the standard Cobb-Douglas production function is used:

where Y is real GDP, A is total factor productivity (TFP), K is physical capital, L is labor, and α is the elasticity of output with respect to the capital input.

25. Because of the absence of reliable national accounts the following assumptions are made: (a) the series of capital stock was constructed using the perpetual inventory accumulation method, with the authorities’ data on real investment; (b) depreciation was assumed to be constant at 6 percent a year, and a capital-output ratio of 1.5 in 1980; (c) population and population growth was used as a proxy for the labor force because no employment information is available. Following the assumptions used in Tahari and others (2004), we applied factor shares of 0.6 and 0.4 for labor and capital, respectively.9 Solow’s residuals were filtered—by using the Hodrick-Prescott filter—following standard methodology, to capture the basic trend and to remove the impact of exogenous shocks.

26. The growth accounting framework, although imperfect and limited,10 helps to clarify the main factors that explain growth. The results, which are in line with previous exercises for other sub-Saharan African countries, demonstrate that growth has been driven increasingly by improvements in TFP.11 Increases in TFP coincide with the period of macroeconomic stabilization and implementation of structural reforms, as well as of higher inflows of foreign capital and concessional assistance (Table 4).

27. Several results of the growth accounting exercise are noteworthy:

  • During the crises period (1981—92), real investment was low, GDP growth was also low and even negative, and, on average, TFP played a small role in explaining GDP growth;
Table 4.Mozambique: Sources of Economic Growth, 1981-2004(In percent)
1981-20041981-841985-921996-2004
Real GDP growth3.94-6.03.28.5
Factor accumulation 1/2.4-0.72.14.2
Total factor productivity 2/1.6-5.31.14.3
Memorandum items:
Investment-GDP ratio22.418.721.726.4
Real investment growth6.2-1.22.56.7
Sources: Mozambican authorities; and IMF staff estimates.

Accumulation of labor and capital, using factor shares of 0.6 and 0.4, respectively.

Residual from the growth accounting exercise (Solow residual, interpreted as TFP).

Sources: Mozambican authorities; and IMF staff estimates.

Accumulation of labor and capital, using factor shares of 0.6 and 0.4, respectively.

Residual from the growth accounting exercise (Solow residual, interpreted as TFP).

  • More recently, during the period of economic reforms, which has attracted foreign direct capital and a significant increase in concessional assistance (1993-2004), real investment growth increased substantially, resulting in a higher investment-to-GDP ratio;
  • Factor accumulation increased during 1996-2004 but it was accompanied by a strong pickup in TFP growth: it increased to 4.3 percent during 1996–2004 from 1.4 percent when the entire period 1981–2004 is considered. In this more recent period of 1996–2004, TFP has increased its role and has accounted for about 50 percent of GDP growth.
  • Between 1996 and 2004, the average investment-to-GDP ratio and real investment growth in Mozambique were at 26.4 percent and 6.7 percent, respectively, showing that the country is above the average for all low-income countries in the world (24 percent and 3 percent, respectively).12

28. Mozambique’s growth experience, especially during the recovery period of 1993–2004, is broadly in line with the findings reported in the empirical literature. This literature has identified the following main determinants of TFP:

  • Better quality institutions and human capital development—basic health care, education, and other high-priority services;
  • A favorable macroeconomic policy environment—less external debt and government consumption and a lower inflation trend;
  • Diversification of the economic base, which depended critically on decisive steps taken on structural reforms, including privatization, financial sector reform, and trade liberalization.

29. Notwithstanding the good progress that Mozambique has achieved in recent years in reducing poverty, the country remains poor, with a per capita income of about US$320. Infrastructure is still inadequate, there are serious unmet education and health needs, and poverty rates are especially high in rural areas: (i) the use of electric lighting remained stagnant; (ii) health service reaches only two-thirds of the population, and 13 percent of Mozambicans of reproductive age are HIV positive; (iii) illiteracy is still high (60 percent); and (iv) market integration in the agriculture sector needs to be increased.

D. Final Remarks and Main Challenges Ahead

30. Mozambique’s population is growing at 1.5 percent annually. The urban working population is expected to grow at 4 percent until 2010, underscoring the need for a growth path with job creation. At the same time, Mozambique faces important challenges in its quest to continue to grow fast and further reduce poverty: (i) the well-known “bounce back” effect of postconflict societies is now exhausted; (ii) a further reduction in poverty will depend crucially on progress in the smallholder agricultural sector; (iii) additional road building is necessary for market integration; (iv) most of the less difficult growth-enhancing reforms have been implemented, such as liberalization of telecommunications, leaving the more challenging institutional reforms, such as judicial and labor reforms, to be addressed; (v) aid will continue to play an important role in boosting GDP growth but may decline as a share of GDP; (vi) HIV/AIDS, which will continue to spread, is estimated to lower output by 1 percent of GDP annually; and (vii) exports need to be increased to raise growth because local purchasing power is not sufficient to support strong growth rates.

31. Mozambique’s development is at a critical juncture. To stimulate private investment, reduce poverty, and reach the MDGs with the help of the international community, Mozambique needs to adopt a second wave of economic and social reforms with well-crafted policies to boost growth. Institutional changes will be key to facilitating technological change and strengthening retating droughts in 1992 and 1994 and floods in 2000sponses to shocks. They can be grouped into three main categories: (i) making the business climate more investment-friendly and favorable to international trade which is essential to promote the private sector and attract foreign direct investment and external aid; (ii) improving fiscal consolidation and public finance management by increasing spending efficiency and the delivery of services; and (iii) overhauling the management of natural resources, particularly in land administration, and implementing a comprehensive rural development strategy to promote labor-intensive sectors.

Figure 4.Mozambique: Growth of Agricultural GDP, 1985-2004

Sources: Mozambican authorities; and IMF staff estimates.

Table 5.Mozambique: GDP, Annual Real Rates of Change in Percent, 1992-2004
19921993199419951996199719981999200020012002200320041992-20041996-2004
(average)(average)
Real GDP-8.66.87.03.36.811.112.67.51.913.18.27.87.26.58.5
Sectoral growth rates
Agriculture total-20.625.5-0.417.08.79.59.56.5-10.813.08.57.27.16.26.6
Fishing-10.07.3-6.52.810.12.1-11.0-1.99.59.0-4.313.4-3.81.32.6
Industry-5.4-2.76.512.217.426.643.618.611.819.723.92.338.816.422.5
Mining-27.524.82.220.1-19.921.120.6-6.552.812.466.234.5215.732.044.1
Manufacturing-7.9-5.7-6.07.818.931.814.414.720.327.24.014.39.611.017.2
Electricity and water-0.73.5-3.06.618.037.9279.078.3-6.113.96.2-27.910.732.045.6
Construction2.02.835.719.024.018.126.23.44.79.760.810.3-2.016.517.2
Services7.85.013.7-9.40.411.17.55.16.411.5-1.06.05.05.35.8
Commerce-11.8-6.314.0-0.3-1.07.811.92.52.45.51.15.2-0.62.33.9
Restaurants and hotels21.333.413.4-5.318.035.5-2.15.46.419.13.310.31.112.310.8
Transport and communication53.38.35.911.110.117.34.89.01.221.6-12.89.016.411.98.5
Financial services0.620.3-8.13.5-3.229.9-17.4-26.941.99.29.40.80.94.75.0
Real estate rentals6.23.54.72.74.43.33.82.2-2.85.72.52.52.23.22.6
Corporate services0.00.00.00.00.00.120.94.4-0.111.911.92.42.24.16.0
Government services1.88.025.7-44.70.22.25.015.16.715.8-2.06.49.43.86.5
Other services-9.94.38.916.89.79.29.710.010.510.36.25.48.47.78.8
Sources: Mozambican authorities; and IMF staff estimates.
Sources: Mozambican authorities; and IMF staff estimates.
E. References

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1Prepared by Alvaro Manoel. It is based on a World Bank background paper: “Mozambique: Macroeconomic Developments, Economic Growth and Consequences for Poverty,” by Maite Benito-Spinetto and Peter Moll, PREM 1, Africa Region, March 10, 2005. Maria Mendéz provided valuable research assistance.
2The ex post assessment of Mozambique’s performance under Fund-supported programs (IMF, 2004) covers Mozambique’s progress in implementing its program of economic reform since 1987.
3Agricultural GDP in Mozambique fluctuated as a result of devastating droughts in 1992 and 1994 and floods in 2000. Figure 4 at the end of this paper shows the volatility of agricultural production in the past 20 years. Vulnerability to shocks has been an important characteristic of the Mozambican economy since major events with substantial impact on growth have occurred at the rate of one in five years. Regressing GDP growth during 1981-2004 against investment and introducing a dummy variable for the war and natural disasters (floods and droughts) indicate the importance of shocks for growth. The regression suggests that growth is cut by about 5.5 percentage points when a major disaster strikes. For details see Benito-Spinetto and Moll (2005).
4Table 5 at the end of this paper presents annual GDP growth rates for the main sectors of the economy during 1992-2004.
5The first phase of MOZAL (MOZAL I) was completed in 2000 and MOZAL II in 2004 for a combined total investment of US$2 billion. The Cahora Bassa hydroelectric plant is located in Tete province and started producing electricity in 1995 and now exports to South Africa and Malawi. SASOL extracts gas from the Temane and Pande gas field on the coast of Inhambane province and exports to South Africa via pipeline.
6Box 1 in IMF Country Report No. 05/168 details the impact of megaprojects on the balance of payments.
7See details of the panel survey in Benito-Spinetto and Moll (2005).
8The Millennium Developments Goal (MDG) table attached to the staff report presents other indicators for the period 1990-2003.
9The results do not change significantly if the share of labor is increased to 0.68 or even to 0.7 as used in another, similar analysis for Tanzania (Treichel, 2005) and Uganda (IMF, 2005). Similar studies also estimate the long-run production function using cointegration methodology. See, for example, Akitoby and Cinyabuguma (2004), where the authors obtain coefficients for capital of 0.34 (for the Democratic Republic of Congo), which are consistent with the values (0.30 to 0.40) used in most growth studies.
10The main limitation is to interpret Solow’s residual as total factor productivity. Besides gains in economic efficiency, the residual may also reflect a number of other factors: political disturbances and conflicts, institutional changes, climate shocks, changes in government policies, intensive exploitation of natural resources, and measurement errors. See Bosworth and Collins (2003) and Tahari and others (2004).
11See Tahari and others (2004) for sub-Saharan African countries’ comparisons and Treichel (2005) for Tanzania. In the case of Mozambique, these results have to be interpreted with caution because of the limitations of the exercise. Once more statistical information become available, the analysis will need to be further refined.
12For more comparisons see Tahari and others (2004).

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