On 25 October 2016, the Inclusive Growth in Mozambique project brought together key actors in macroeconomic policy management from the Ministry of Finance, the Bank of Mozambique, and Mozambican academia. The goal was to jointly reflect on the current challenges and future scenarios of the Mozambican economy. Background for discussion was provided in a presentation by Sam Jones of Copenhagen University, who is leading the technical support to the Ministry of Finance of Mozambique in this area.
The forum took place at the Joaquim Chissano Conference Centre in Maputo, where more than 90 participants joined the debate. The popularity of the event speaks to the importance of the subject, in particular the present economic crisis and concerns around future scenarios for the Mozambican economy.
Increasing stability and economic opportunities after years of war
Sam Jones began by leading the audience through a short history of the country, setting the stage to the current economic challenges Mozambique faces. Scourged by an independence war over the period 1964-74, followed by what is known as the 'destabilization war', from 1977-92, only in 1993 did Mozambique start to see the prospects of peace and a peace dividend. However, the early period of reconstruction and recovery was one of severe inflation and economic volatility. From 2002-07 the country started experiencing a more stable and predictable macroeconomic path, with GDP growth rates averaging 7% per annum and an inflation rate nearing 10% each year.
Fast (and riskier) growth: 2008-15
The most recent period, 2008-15, was characterized by maintenance of stable economic growth, lower and controlled inflation, and strengthening of the country's fiscal space, including increased public revenue and a reduction in the importance of external aid.
However this positive evolution was accompanied by riskier choices. Public expenditure grew faster than revenues, and was increasingly funded by external public debt. At the same time, large inflows of capital brought a consistent strengthening of the country's real exchange rate, and a significant deterioration of the country's balance of trade.
This confluence of factors led to three challenges:
A possible loss of access to external capital flows.
Risks associated with a strong real exchange rate.
Risks associated with lower attention given to key sectors in the economy, particularly those important to job generation.