In the context of the Mozambican Budget Support Program financed by 19 donors (hereinafter referred to as G19 or PAPs), the PSWG was requested to prepare a proposal of indicators on the Employment Promotion" component under the "Performance Assessment Framework" (PAF). The proposal should include a set of indicators that would serve as reference for monitoring of the Government of Mozambique performance in fiscal year of 2012.
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On the launching of the “Basic Food-basket and Transport Subsidies” the government wanted to protect the most vulnerable from potential price increases. Problems with administration and implementation together with slower domestic inflation and good economic performance led to a decision to stop moving ahead with these two subsidies. The question now is whether economic and social conditions that government originally wanted to address with the subsidies have been resolved.
As part of celebrations of 19th anniversary of the establishment of SADC, USAID / SPEED organized a seminar on the Challenges of Competitiveness of Mozambique in SADC," a seminar organized by CEMO. The seminar and paper below looked at three international indices that analyze competitiveness (Global Competitiveness Index, Doing Business, Economic Freedom Index). The indexes showed Mozambique's weak competitiveness within the region and worldwide. The country is below the regional average in all indexes. Increased productivity was identified as the key factor to increase the competitiveness of Mozambique. To this end, the SPEED team identified other key challenges for improving Mozambique's competitiveness within SADC, including the need for improvement: (i) the business environment through faster adoption, implementation and monitoring of reforms, (ii) the quality of infrastructure through the prioritization of public investment in infrastructure; (iii) the quality of public service delivery, including increasing the qualification of the basic skills of the workforce through greater investment in vocational technical education, (iv) and macroeconomic policy management.
The private sector is fundamental to the economies. It generates income, wealth and jobs. The development of the private sector depends on the business environment, challenges facing the economy and how governments react to those challenges.
Mozambique can have an excellent and bright future. The country has been blessed with enormous non-renewable resources that, with good use, will transform the country into a developed and prosperous economy, with high per capita incomes and extraordinary possibilities without poverty and inequalities. Reaching such future depends on how the main challenges facing Mozambique will be addressed.
Over the last decade, Mozambique has made some improvements to the business environment resulting from legislative and administrative changes that streamlined business-related legislation and processes. Nevertheless, the overall pace and depth of reform are still slow. Mozambique’s business environment remains restrictive for private sector enterprises. In the SADC region, the country remains as one of the four worst ranked countries.
In May and June 2011, representatives of Georgia and Rwanda came to Mozambique to share their experience in undertaking reforms to improve their countries' Doing Business Rankings. These experts are from the two best Doing Business country reformers, Georgia and Rwanda. They shared their countries experience in reforming the business environment. The experts are: Mr. Aleksi Aleksishvili, a former minister of finance and economy of Georgia; and Mr. Tushabe Karim, a specialist from the Doing Business Unit of Rwanda.
SPEED conducted an independent review of the draft law on business insolvency which was prepared in 2009 and is expected to be submitted in parliament later this year. The SPEED team deemed it necessary to assess the draft law’s strengths and weaknesses and determine if further revisions are needed before submission. The new law would completely overhaul Mozambique’s existing framework and replace it with a far more modern model conforming to international standards. The review found the draft law largely appropriate, though seeing that it is based on a Brazilian model, adaptations should be made in implementation. The review also elaborated interventions and resources that will be needed for transitioning to the new insolvency system, most particularly in judicial system training, related institutional reforms, capacity building for insolvency administrators and other associated professions (legal, management and accounting). SPEED will work with key stakeholders in government, parliament, the banking sector, unions, and private sector associations to help move the draft law to passage in parliament during the year. Additional resources on insolvency in Mozambique can be found here.
The Impact of Exchange Rate Fluctuations on Economic Development in Mozambique
The exchange rate is a central price in the economy of Mozambique. It is a key variable in establishing the domestic price level. It is the principal equilibrating variable in the country’s international trade and payments. And, ultimately, it is a major facilitating variable in determining the rate and pattern of economic growth. To underscore the importance of the exchange rate in the economy of Mozambique just ask any taxi driver in Maputo for the latest US dollar or Rand or Euro exchange rate and he can tell you right away. But ask him about other important prices, such as the latest bank interest rates or evolution of the consumer price index, and he will generally draw a blank. The taxi-driver’s intimate knowledge of exchange rates stems from the fact that foreign currency rates are ubiquitous to everyday life in Mozambique. Trade integration with global markets has risen fast over the last several decades, particularly in terms of imports, and foreign currency is widely used locally for consumer and business transactions (e.g., rent payments on apartments, buying consumer goods across the border, accounts payable in business), as well as for savings. This ever-present nature of foreign currency in daily life amplifies the importance of exchange rate fluctuations on the economy and captures the interest of policymakers.