Economic Policy for Inclusive Growth

Despite a trajectory of two decades of high growth rates, 7% average annual, there was no parallel trend of poverty reduction, so that high poverty incidence^[1] and persistent inequality remain key challenges in Mozambique. The growth rate is based on large foreign investments in the capital-intensive energy and mineral sectors, as well as large inflows of foreign aid. The potential for growth remains strong over the medium/long term, based on prospects of exploitation on natural gas and mining industries. The main challenge of such an economic structure is its sustainability like through better economic diversification over the medium-long term as well as the question of inclusivity of this growth for example by expanding basic services to the most left behind. Tackling these challenges through an ‘inclusive growth’ approach needs development and implementation of appropriate policies, investment decisions, effective governance and human resources capacity. Whether or not a country’s reserve of natural resources aids its inclusive economic development, it is largely determined by the quality of its public response.

The overall goal of the program is to support inclusive growth that improves the living standards for Mozambicans. To do so, the program will support policy oriented research as well as economic policy analysis and debate aiming at generating new insights and options for promoting and implementing policies that facilitate inclusive growth. The proposed program will contribute to enhance the quality and implementation of economic policies for inclusive growth through:

(i)    Strengthened MEF (Ministry Econ. and Finance) Economic Studies Department as a more effective centre of competence within the Government for policy making

(ii)   Increased and broadened economic analysis and research capacity by academic, CSOs and private sector institutions

(iii)  Increased collaboration and exchange between government and non-government institutions on design and implementation of inclusive policies

Switzerland is a long term and trusted partner in capacity building for economic management policy making. It contributed to the establishment of an economic policy analysis unit within government, which gathers and analyses data on macroeconomic as well as poverty issues and became relevant for policy making and decision processes in this field. Measures to strengthen economic analytical capacity have been implemented over years, some with significant donor support, including from Switzerland. Key medium term development policies benefited from the results of economic research in the MEF, in particular the four national poverty assessments undertaken. Those studies influenced the country’s poverty reduction strategies and more recently the government’s Five Year Plan, with a shift towards inclusive growth with wealth and employment generation. The proposal foresees an Inception Phase that will enable to refine the intervention strategy, in particular for the non-government component, taking careful consideration of the complementarities and enhancing synergies with the existing program in the economic development and the governance domain. Thus, the proposed intervention is positioned to be a central analytical piece for the whole cooperation program portfolio in Mozambique.

For the first phase, the proposal requests an opening credit amounting to CH 150’000.

[1] (at 46% in 2015)