On June 1, 2000 the World Bank's Board of Executive Directors discussed the Bank Group's Country Assistance Strategy (CAS) for the Republic of Mozambique covering the period 2001 to 2003.

Mozambique has made enormous strides since the end of the war in 1992, when it was still heavily reliant on food aid and its economy was centrally planned. Today the country is at peace, a market economy is in place, and substantial progress has been made on a challenging reform agenda, all leading to a growth rate among the highest in the world. This performance has been recognized by the international community with substantial external assistance as well as debt relief under the original HIPC framework in June 1999 and under the enhanced HIPC framework in April 2000.

Despite rapid growth, the lives of most Mozambicans continue to be characterized by poverty, illiteracy and disease, in a country which is still one of the poorest in the world. The challenge for Mozambique today and the focus of the Government's program is to sustain broad-based, private sector led growth while ensuring that its benefits reach the poor. First, private sector investment will need to stimulate rural development and increase employment and economic opportunities throughout the country. This requires maintaining prudent economic management, strengthening the financial sector, building and maintaining key infrastructure, improving the legal and regulatory framework, and ensuring sound environmental management. In addition, domestic private sector firms and workers need to acquire the skills and experience to improve productivity, exploit new sources of growth and compete in the world economy. Second, the public sector's ability to deliver basic services and enforce a regulatory framework supportive of private sector development through increased decentralization and improved capacity needs to be enhanced. Third, to improve human capabilities, especially among the poor, efforts will need to continue for better access to quality basic health and educational services. Action is especially needed to control HIV/AIDS, now the greatest single threat to development.

a. The Bank Group's CAS is designed to support the Government's poverty reduction strategy. As such it will help (i) increase economic opportunities, (ii) improve governance and empowerment, and (iii) improve human capabilities, the pillars of the Government's new Five Year Program. This will be done within a framework of development partnerships, taking into account the country's weak capacity and substantial access to grants. The strategic orientation of the CAS recognizes a dual role for the Bank: as a catalyzing and analytical partner to the Government's development efforts, the Bank will continue to draw on its comparative advantage in aid coordination and in analytical services, especially in sector and policy analysis and program design; as a financing partner, the Bank will be more selective, recognizing where other partners have a comparative advantage and are able to provide grants.

As poverty reduction is the overall goal of the Government and of the Bank Group in Mozambique, a key objective of this CAS is to help improve the focus, effectiveness, and monitoring of anti-poverty actions. Most new IDA lending, as well as IFC investments and advisory services, will focus on increasing economic opportunities which is likely to have the greatest impact on reducing poverty, even in the short-term. IDA lending will contribute to developing rural infrastructure, improving the environment for the private sector, and promoting investment, innovation, competitiveness and employment. In support of this agenda IFC will provide advisory assistance, capacity building, and financing to develop private infrastructure, build the financial sector, and support small and medium-scale enterprises (SMEs) and foreign investors in developing key sectors. Under this CAS there will be an increased focus on improving governance and empowerment, since limited administrative capacity is now a primary constraint to reform and development. New operations in this area will focus on improving public sector management and capacity as well as strengthening the Government's decentralization efforts to promote empowerment and program effectiveness. Support will also be given to improving the legal and judicial system. IDA will continue its support for improving human capabilities. As there is already substantial IDA support from ongoing programs (particularly in health and education), new IDA lending in this area will be limited, while IFC will support private providers of health and education services. Under this CAS the Bank will provide support to the Government's new program to combat HIV/AIDS and will reorient existing and new projects to assist in the fight against this pandemic.

The CAS was developed through a consultative process that included a variety of groups such as government officials, donors, NGOs, trade unions, religious leaders, academics, journalists, the private sector, and the rural poor. In its implementation, the CAS will support a dialogue aimed at forging a common long-term vision for Mozambique, increasing national ownership of this agenda, and fostering strong partnerships among these groups. The Bank Group, through its analytic and advisory services and program implementation, will participate in these partnerships. In supporting Mozambique's development agenda, the Bank works increasingly with civil society, the private sector, academics and donors and continues to play an important role in aid coordination, including overall and sectoral reform programs. Continued coordination with all partners through sector-wide approaches and the PRSP will help consolidate partnerships and enhance Government leadership and accountability. The Bank will also continue to capitalize on partnerships within the Bank Group: the CAS is a joint IDA-IFC product and its emphasis on generating private sector growth calls for close IDA, IFC, and MIGA collaboration. There will also be an increased role for WBI while a close collaboration with the Fund will continue.

Under this CAS, financing through new IDA projects will range up to US$540 million, conditional on continued satisfactory policy performance and effective implementation of the existing project portfolio. Actual new IDA lending will be scaled to match limited absorptive capacity and to accommodate the availability of grants. Higher lending levels will be contingent primarily on increased absorptive capacity, implementation of related public sector reforms, and progress in implementing the poverty reduction strategy. The Bank Group's business strategy also includes an extensive complement of advisory and analytical activities. IFC's investments, with a current portfolio of about US$150 million, are expected to increase substantially over the CAS period, so that Mozambique will remain one of the Corporation's largest portfolios in Africa.

© HLDF 2000
Humanitarian Landmine Disposal Foundation
hldf@hldf.pt