UNDP Poverty Report 2000

Overcoming Widespread Poverty

After years of civil conflict, structural adjustment and a dearth of resources to improve people's standard of living, Mozambique is about to launch a new poverty reduction plan. What it most needs are policies to promote pro-poor growth and effective governance.

With the resumption of growth in the mid-1990s, the country adopted a five-year development plan (1995 - 99) that set the eradication of extreme poverty as one of its main objectives. This signalled a transition from a reliance on social safety nets to a more growth-centred approach to poverty.

Poverty Plan Under Preparation

The government has no explicit stand-alone anti-poverty plan, though it recently adopted official guidelines for a provisional poverty reduction plan for 2000 - 04. The plan will no doubt help coordinate anti-poverty initiatives, such as those for food subsidies, agricultural development and job creation.

The food subsidy programme, in existence the longest, has been the most successful in targeting benefits to the poor. In general, however, relying on targeted interventions makes little sense in a country where poverty is so widespread: about 69% of the population in Mozambique is poor, with four-fifths of the poor in rural areas. Poverty is so serious that the average income per person is below the official poverty line.

For a long time the country's development has been hampered by internal conflict. Landmines still pose a serious problem. But the current peace is probably the single most significant factor enhancing the prospects for poverty reduction. The rural population has been able to resettle and resume agricultural production. Social expenditures are now growing faster than those for defence.

The country still faces drought, flooding and typhoons, and sometimes plagues in the wake of disasters. Malaria, a continuing problem, has had a major impact on people's health and productivity. As a poor country, Mozambique has difficulty dealing with these problems and recovering from the shocks.

External Resources

The country remains heavily dependent on aid, now 38% of GDP and averaging $63 a person a year. According to UNDP data, while more official development assistance is now being decentralized to build up the provinces, it tends to go to provinces that have less poverty. So the seemingly progressive reform of decentralizing spending has contributed less to poverty reduction than it should have.

The government approved a series of privately financed megaprojects, to be undertaken by multinational corporations, to build physical infrastructure - ports, dams, water supply and power grids. But the direct effect on jobs and on poverty is not likely to be great. And regional inequality is likely to intensify as the infrastructure stimulates growth mainly in the south of the country. The provisional poverty reduction plan gives little attention to rising inequality. What is critical for Mozambique is to generate sustained pro-poor growth that will benefit the rural poor as quickly as possible.

The government has new fiscal incentives, such as an 80% reduction in the industrial tax, to encourage private investment in the poorer provinces, which are expected to receive the highest priority for public investment.

Lack of Funds

The real issue for budget allocations is the general lack of funds. The poverty reduction plan does not yet have a budget, and most of its pro-posed budget is for education and health. The country has no externally funded social action fund, though one existed in the Social Dimensions of Adjustment programme in the early 1990s. Eligible for debt relief of $3.7 billion under the Heavily Indebted Poor Countries Initiative, Mozambique expects to channel the funds earmarked for debt servicing into the poverty reduction plan.

But until enough resources are available, decentralization is not a viable option. Most provincial and local governments now run budget deficits. About 90% of the taxes continue to be collected at the centre. Local governments - few of them elected - need to be strengthened to implement the proposed anti-poverty plan. Representatives of civil society organizations have not played an active role in poverty programmes, and there is no provision for encour-aging their participation. So making governance more pro-poor remains a major challenge.