Poverty in Mozambique will be difficult to reduce despite economic growth

28 May 2013

Mozambique’s economy has remained unchanged structurally speaking, which limits its ability to reduce poverty, despite high and sustained economic growth over more than a decade, according to the African Economic Outlook report, published Monday in Morocco.

According to the report drawn up by the African Development Bank, the OECD, the African Economic Commission and the United Nations Development Programme, the Mozambican government will have to boost its institutional capacity in order to increase tax collection, manage its public debt appropriately and to improve its planning for investments.

With economic growth of 7.4 percent in 2012, Mozambique is expected to post growth of 8.5 percent this year and 8 percent in 2014, due to a sharp increase in coal mining and exports, execution of large infrastructure projects and expansion of credit to the private sector.

However, public investment and a drop in the amount of foreign aid it receives, will lead to increased pressure on public accounts, with the budget deficit increasing from last year’s 8.2 percent to 9.2 percent this year and 9.5 percent in 2014.

The report said that despite the fact that large projects had yet to have a significant impact on state revenues, by 2025 Mozambique was likely to be classified as a medium income country.

In Angola’s case, the reported notes that the business climate remains difficult due to a lack of institutions and infrastructure, although creation of the Sovereign Fund should help protect the economy from oil price volatility.

Noting the progress made in a number of human development indicators, the report said that Angola still provided only a rudimentary social security system in the form of fuel subsidies.

This year Angola’s economy is expected to post growth of 8.2 percent, which will fall slightly to 7.8 percent in 214, after recovering from the world financial crisis.

Unlike the remaining Portuguese-speaking African countries, Angola, which in 2012 posted a budget surplus of 7.8 percent of Gross Domestic Product, is this year expected to see that surplus fall to 4.8 percent and to 3.5 percent in 2014. (macauhub)