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Mozambique: Economic Growth as an Instrument for Poverty Reduction

Ignacio Hernandez's picture

Mozambique’s poverty reduction programs aim at reducing absolute poverty by 30 percent by 2010, which can only be achieved with a GDP growth of 8 percent per year or more over the next ten years.

 

Bruce R. Bolnick from the Center for International Development at Harvard University argues that this very ambitious target is feasible. In his paper Economic Growth as an Instrument for Poverty Reduction in Mozambique: Framework for a Growth Strategy" he studies the relationship between Growth and Poverty Reduction and applies it to the specific case of Mozambique.

 

He mentions six fundamental ideas to take into account when choosing a strategy to reduce poverty:

 

First, that rapid, broad-based and sustainable growth is an essential and powerful instrument for poverty reduction. Prosperity for the people will remain out of reach unless there is a tremendous expansion in productive capacity, and a corresponding increase in the resource base for financing public-sector programs.

 

Second, that high rates of saving and investment, and rising productivity are the foundation for rapid and sustainable growth. These three basic factors should therefore figure prominently in the development of a successful growth strategy. At the same time, the distribution of investment and productivity gains has to be broad based, to ensure that growth benefits the poor.

 

Third, that human development plays an essential role in fostering growth. Growth and human development are mutually reinforcing: growth promotes human development, and human development promotes growth. An effective program to foster growth and human development creates a "virtuous circle" of accelerated progress in poverty reduction. Effective policies for human development are therefore a vital component of the growth strategy.

 

Fourth, that rapid, sustained and broad-based growth is achievable. Fifty years ago no one dreamed that a poor country could sustain per capita income growth above 5% per year. Yet this outcome has been realized by a handful of countries. Mozambique is well placed to match or surpass this standard, but success depends on maintaining a high rate of investment and steady gains in productivity.

 

Fifth, that government policies, programs and institutions are critical determinants of investment, productivity, and hence growth. While the private sector is the main engine of growth, government is the catalyst. Rapid, sustained and broad-based growth requires an environment of well-conceived and consistent policies, efficient administration of public programs, and effective public-sector institutions that facilitate private initiative.

 

Finally, that the people are the central players in the growth process, not passive "target groups" for actions taken by government. The growth strategy must address the needs, capabilities, potentialities, aspirations and vulnerabilities of poor households, as essential participants in a successful development process. It must also facilitate the development of domestic entrepreneurs, while taking full advantage of growth opportunities afforded by foreign investment.

 

Via Eldis.