World Bank Group Endorses $1.7b Strategy to Enhance Diversification in Mozambique

The World Bank Group (WBG) Board has endorsed a new Country Partnership Framework (CPF) with Mozambique for the Fiscal Years 2017-2021. The CPF focuses on a set of objectives reflecting the Government of Mozambique’s five-year program (Plano Quinquenal do Governo); development priorities identified in the WBG’s own diagnostic (SCD); and the institution’s comparative advantages. In line with these principles, the CPF objectives are organized into three focus areas: promoting diversified growth; investing in human capital; and enhancing sustainability.

“This approval comes at a crucial juncture for Mozambique. The country needs to prepare for its upcoming resource-rich status and develop a more diversified and productive economy, which will depend on how effectively natural wealth is reinvested into human, physical, and institutional capital,” said Mark Lundell, World Bank Country Director for Mozambique, Madagascar, Mauritius, Seychelles, and Comoros. “Among other things, this strategy will support institutions and build systems in Mozambique to achieve just that.”  

Against the backdrop of longer term challenges such as stimulating more diversified and inclusive growth, the country’s short-term prospects are considerably challenging in result of recent revelations regarding unreported debts.  The institution’s current focus will be on helping the country to address the macroeconomic consequences of the undisclosed debt and restore confidence. The Bank will help the authorities address these challenges in close coordination with the International Monetary Fund (IMF) and will make use of advisory support on fiscal consolidation and debt management, among other instruments. It will also support efforts to address underlining causes of conflict such as those pertaining to land, forest, and natural resources management.

The International Development Association (IDA) and the International Finance Corporation (IFC) – the private sector arm of the World Bank Group, will work side by side in stimulating and leveraging the private sector, including in key sectors such as agriculture (and its value chains) and energy. IFC’s investments and advisory services in the financial sector will remain a strategic priority, helping to increase access to finance for businesses across the country, and providing integrated SME development solutions.

This strategy’s indicative financing envelope is US$1.7 billion from (IDA). Approximately US$120 million are available during FY17. From FY18 onwards an indicative IDA allocation in the range of US$410 million per year is planned subject to the annual IDA performance-based allocation and overall resource availability. The resumption of budget support operations, halted following the debt revelation, will depend on Mozambique’s progress in restoring debt sustainability and an adequate fiscal and macroeconomic framework.

This strategy was developed in dialogue with the Mozambican authorities and validated through a series of stakeholder consultations such as private sector, development partners, and civil society, including national and international NGO’s, academia, and media. The strategy is consistent with the World Bank Group’s twin goals of eradicating extreme poverty by 2030 and boosting shared prosperity.

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