Action Plan for the Reduction of Abslute Poverty (2001-2005) - Republic of Mozambique

Source: Government of Mozambique

Strategy Document for the Reduction of Poverty and Promotion of Economic Growth

Translated from original text in Portuguese

Final Version Approved by the Council of Ministers
April 2001

1. Introduction

2. Characteristics of Poverty

   1. The Prevalence of Poverty

   2. The Poverty Profile

   3. Determinants of Poverty in Mozambique

3. The Demographic, Macro-Economic and Territorial Context

   1. The Demographic Context of Poverty

   2. The Macro-Economic Context

   3. The Territorial Context

4. Action Plan for the Reduction of Absolute Poverty and the Promotion of Economic Growth

   1. Fundamental Areas of Action
      1. Education
      2. Health
      3. Infrastructure (Roads, Energy and Water)
      4. Agriculture and Rural Development
      5. Good Governance, Legality and Justice
      6. Macroeconomic and Financial Policies
   2. Other Areas of Action
      1. Employment and Business Development
      2. Social Action
      3. Housing
      4. Mining
      5. Fisheries
      6. Tourism
      7. Manufacturing Industry
      8. Transport and Communications
      9. Technology
      10. Environment
      11. Reduction of Vulnerability to Natural Disasters
5. Consultation Process
6. Monitoring and Evaluation Strategy
   • Annex to Chapter 6 - PARPA Monitoring and Evaluation Indicators
7. Budgetary Implications

Tables:

• Table 2.1. Average consumption and poverty estimates by zone and region
• Table 2.2. Average consumption and estimates of poverty and destitution by province, 1997
• Table 2.3. Non-consumption indicators of Well-being: Human Poverty Index
• Table 2.4. Selected variables showing poverty levels and area of residence
• Table 2.5. Implications of economic growth for poverty reduction (1987 – 2001) on the basis of simulations
• Table 2.6. Evolution of social and welfare indicators 1994-2000
• Table 3.1. Selected Economic and Financial Indicators, 1999-2010
• Table 3.2 Relationship between economic growth and the reduction of poverty
• Table 3.3. Provincial Indicators - 1998
• Table 6.1. Monitoring the PARPA. Programmed Products and publications
• Table 6.2. Sequence of Indicators
• Table 7.1. Projection of Budget Resources, 1999-2010
• Table 7.2. Projection of External Budget Financing, 1999-2010
• Table 7.3. Projection of Budget Resources, 1999-2010
• Table 7.4. Public Expenditure on Priority Areas, 1999-2005
• Table 7.5. Projection of Medium-Term Budget Expenditures, 2001-2005
• Table 7.6. Indicative Projected Budget Requirements for Sectors and Selected Areas, 2001-2005
• Table 7.7. Average Unit Costs of Selected Specific Actions
• Table 7.8. Unit Costs and Projected Budget for Selected Specific Actions

I. Introduction

1. The Government of Mozambique, in order to provide continuity to its strategy to combat absolute poverty, hereby presents the Action Plan for the Reduction of Absolute Poverty (PARPA) 2001-2005. The PARPA 2001-2005 explains the strategic vision for reducing poverty, the main objectives, and the key actions to be pursued, all of which will guide the preparation of the State’s medium-term and annual budgets, programmes, and policies. The PARPA 2001-2005 is also Mozambique’s first Poverty Reduction Strategy Paper (PRSP).
2. This document is based on prior Government plans, including the Lines of Action for the Eradication of Absolute Poverty (1999), the PARPA 2000-2004 (Interim PRSP), and the Government Programme 2000-2004, as well as the sectoral and inter-sectoral plans, policies and strategies developed by organs of the State.
3. Production of the poverty reduction strategy has benefited from a process of consultations with relevant groups and segments of society outside the public administration. The sectoral strategies and programmes, the provincial poverty profiles, and the previous PARPA, all benefited from a broad and extended process of participation by civil society and external financiers. This document itself has also benefited in form and content from contributions resulting from the broad participation of civil society. Deeper discussions on the document as a whole, and on various parts, will continue, since planning is an iterative process of continuous improvement.
4. Given its medium-term focus, the PARPA is a rolling and dynamic programming instrument. This will enable the plan to incorporate new elements arising from changes in society and the economy. The key objective – the reduction of absolute poverty – will not be altered, but the tools, policies and targets may change as our knowledge of different variables improves. Therefore, the PARPA is an instrument defining policies and actions that will be periodically reviewed and perfected, involving an ongoing process of consultations.

Central Objective

5. The central objective of the Government is a substantial reduction in the levels of absolute poverty in Mozambique through the adoption of measures to improve the capacities of, and the opportunities available to all Mozambicans, especially the poor. The specific objective is to reduce the incidence of absolute poverty from 70% in 1997 to less than 60% by 2005 and less than 50% by the end of this decade.

Context

6. The fight against poverty has been going on since the first days of Independence, when high priority was given to expenditure on health and education, to improve human development. Significant investments were also made in rehabilitating basic infrastructure. Starting in 1987, the Government adopted a stabilisation and structural adjustment programme with the objective of re-establishing production and improving incomes through deep reforms aimed at creating an economy based on private initiative and market forces.
7. There have been notable successes. Over the last five years Mozambique achieved annual economic growth rates of around 8% in real terms, in the context of economic and political stabilisation. Democracy and peace were strengthened, and the Mozambican people continued their struggle for progress. With stability and reforms, GDP per capita grew to US$ 230 in 2000, significantly improving incomes compared to five years earlier.
8. Nevertheless, these achievements have not resolved our grave social and economic problems. The country remains one of the poorest in the world, and poverty clearly remains as the key challenge facing the country. Our ability to address this challenge is still limited by a severe scarcity of resources resulting from a serious structural weakness of the economy.
9. Analysis of data from the Household Survey (IAF) of 1996/97 has provided a detailed profile of poverty in Mozambique. Nearly 70% of the population lives in absolute poverty, and there are notable urban-rural and regional imbalances. The IAF data also permitted an identification of the main determinants of poverty in Mozambique, namely:
   1. slow growth of the economy until the beginning of the 1990s;
   2. low levels of education of working age household members, particularly women;
   3. high dependency rates in households;
   4. low productivity in the family agriculture sector;
   5. lack of employment opportunities within and outside of the agricultural sector; and
   6. poor infrastructure, especially in rural areas.
10. Besides suffering from acute material poverty, the poor in Mozambique also suffer from a high degree of vulnerability to natural disasters and economic shocks. This was made clear by the tragic floods, which afflicted the country in 2000 and 2001, as well as the privations caused in recent years by low prices in the international markets for the country’s main agricultural products.
11. To deal with this situation of poverty, its determinants, and economic constraints, the government decided to develop a comprehensive and integrated poverty reduction strategy and establish a detailed process for preparation of the PARPA.

Strategic Vision for Poverty Reduction in Mozambique

12. The poverty reduction strategy in Mozambique depends critically on the basic assumption of the maintenance of peace and socio-political stability.
13. The previous PARPA (2000-2004) emphasised measures that benefit the poor in the short term. The new PARPA (2001-2005) broadens the strategic vision by also recognising the crucial importance of medium and long-term measures to fight poverty through policies to sustain rapid and broad-based economic growth.
14. For a poor country such as Mozambique, rapid growth is an essential and powerful tool for poverty reduction in the medium and long-term. Without growth, the objective of increasing the capacities and expanding the opportunities for the poor will continue to be severely constrained by the lack of public and private resources. Therefore, the strategy contains policies aimed at creating a favourable climate for stimulating investment and productivity, and achieving an average annual GDP growth rate of 8%.
15. The strategy also includes policies and programmes to ensure that growth is inclusive, so that the poor will benefit integrally. This, in the final analysis, will occur through greater access to assets (including improvements in human capacity) and the more efficient use of such assets by individuals, families and other institutions, especially in rural areas. A pro-poor growth strategy also requires a policy climate which stimulates the private sector to accelerate job creation and increase income generating opportunities through self-employment. In addition, components of the programme will be implemented taking into account the need for a better regional balance, with special attention given to regions with the greatest concentration of poor people.
16. The dynamics of human development and broad-based growth are interdependent. Thus, a strategy combining programmes that benefit the poor in the short-term, with policies that deliver benefits in the medium and long-term by promoting rapid and balanced growth, provides the best chance for creating a "virtuous cycle" of accelerated and sustainable progress in the fight against poverty.
17. In concrete terms, the poverty reduction strategy in Mozambique is based on six priorities aimed promoting human development and creating a favourable environment for rapid, inclusive and broad-based growth. The "fundamental areas of action" are:
    1. education,
    2. health;
    3. agriculture and rural development;
    4. basic infrastructure;
    5. good governance; and
    6. macro-economic and financial management.
These areas for action are considered as "fundamental" because they are absolutely essential for reducing poverty and stimulating growth, and also because their impact is both deep and broad. The selection of priorities was based on the diagnosis of the poverty determinants in Mozambique, as well as studies on the issue of poverty reduction (in light of international experience), and consultations with civil society and the private sector.
18. Education is a basic human right. Its fundamental role for poverty reduction is universally recognised. Access to education contributes directly to human development by improving capacities and opportunities for the poor, promoting greater social, regional and gender equity. Without a doubt, knowledge is an indispensable means for improving the living conditions of Man. Education is also essential for rapid growth, as it expands the quantity and quality of human capital available for productive activities, and the ability of the nation to absorb new technologies. The main objectives in the area of education include achieving universal primary education, while rapidly expanding secondary education, informal education, and technical-vocational training. The programme also includes a commitment to combat HIV/AIDS through schools. Given the serious scarcity of technical and management capacity, which is an impediment to economic growth, the programme takes into account the necessity of expanding and improving the system of higher education. Thus, a programme for each level of education is required, though the largest share of resources will be allocated to primary education.
19. The health sector also plays a fundamental role in directly improving the well-being of the poor, while at the same time contributing to rapid economic growth by improving the quality of human capital. The main objectives in the field of health include an expansion of, and improvement in, the coverage of primary health care through special programmes geared towards target groups such as women and children, a campaign to reverse the current growth of the HIV/AIDS epidemic, and greater efforts in the fight against endemic diseases such as malaria, diarrhea, tuberculosis and leprosy. The strategy also includes initiatives in related areas linked to health, such as the provision of water (infrastructure) and food security (agriculture).
20. More than 70% of the population is concentrated in rural areas, and an even higher proportion depends on agriculture for survival. Agriculture contributes around 30% of GDP, with most production coming from the family sector, which covers more than 3 million families. For this reason, agriculture and rural development is a priority in the strategy for poverty reduction and broad-based growth. The principal objective of rural development is to increase income-generating opportunities, especially for the family sector. The generation of income depends on agronomic advances to raise productivity, but also, and fundamentally, on access to markets. Rural development will benefit from actions to develop human capital and infrastructure, amongst others. It is also promoted through increased rural production, especially in agriculture. The expansion in production of the agricultural sector will be carried out with the support of rural extension programmes based on specific crops and technologies, as well as improvements in the financial system, whose role will analysed. The strategy for rural and agricultural development will also focus on food security policy, which is fundamental to reducing poverty and risks to the poor.
21. A fundamental role of the State in stimulating a market economy and expanding opportunities for the poor lies in the development of basic infrastructure. Improvements in the road network will permit better access to markets and a reduction in costs, and will facilitate communication and mobility, especially for those who live in rural areas and depend on agriculture. In parallel, the provision of water and energy is fundamental to the development of human capital and the expansion of national output. Priority in the rehabilitation and construction of basic infrastructure will be given to those areas of the country with the largest populations and highest levels of poverty.
22. Good Governance is a fundamental condition for success of the poverty reduction strategy. The quality of State institutions is very important for the provision of public services benefiting the poor. It is also a critical factor for achieving rapid and sustained growth. The current programme includes policies for promoting good governance in various forms, including: decentralisation and devolution of public administration, to bring government closer to the people; reform of public institutions so they can better respond to the needs of the people, starting with the simplification of bureaucratic procedures to eliminate "red tape"; programmes aimed at strengthening the capacity and efficiency of the legal and judicial system, improving public safety, protecting the rights and freedoms of citizens, ensuring contract enforcement and facilitating the resolution of disputes; and developing a programme to reduce and contain corruption at all levels.
23. The last fundamental area of action is macro-economic and financial management. Experience internationally, and in Mozambique, shows that macro-economic management and financial development are basic requirements for creating an environment to stimulate rapid growth and poverty reduction. Principal priorities in this area include:
    1. Fiscal, monetary and exchange rate policies to maintain low inflation and increase competitiveness of the economy.
    2. Policies to mobilise additional budgetary resources equitably and efficiently.
    3. Policies to improve the management of public expenditure.
    4. Policies to secure and expand financial markets, including a careful analysis of opportunities to expand financial services to rural areas and extend them to small and medium enterprises.
    5. Policies to promote international trade.
    6. Policies to strengthen the management of domestic and foreign debt.
24. The strategy and action plan also cover, in less detail, complementary activities to those viewed as fundamental areas of action. The "other areas of action" include: selected social programmes (targeted social welfare programmes)¹, housing; sectoral policies and programmes that contribute to income generation and job opportunities (business development, fisheries, mining, industry, tourism); programmes to reduce vulnerability to natural disasters; and policies that support sustainable growth (transport and communications, technology, environmental management).
25. It may be noted that the poverty reduction strategy focuses on the principal determinants of economic growth – investment and productivity – through the creation of a favourable environment. In a market-driven development strategy, the main role of government in promoting investment and increasing productivity is covered by the priority areas cited above, in particular through investment in human capital, the development of infrastructure, programmes to improve the quality of public institutions, and policies for efficient macro-economic and financial management. Many of the complementary actions will also improve the investment climate and promote efficiency in specified areas. The critical issue of job creation is also dealt with through the priority programmes, in conjunction with measures to be taken in other complementary areas.
26. The strategic vision emphasises the reduction of absolute poverty defined in terms of material needs and lack of capacity and opportunities. At the same time, the strategy contains important features covering other basic dimensions of poverty, namely vulnerability and empowerment.
27. The need to reduce vulnerability is addressed in various ways, including: all of the education and health programmes; the programme for agriculture and rural development; the programme to improve access by the poor to basic infrastructure and improve the quality of public institutions, especially in regards to the legal and judicial systems and public safety; the management of macro-economic and financial policies, to minimise the risk of economic shocks; a profound commitment to preserving peace; and subsidiary activities in the areas of social action, management of natural disasters, and environmental protection.
28. The emphasis on education and health also has a direct bearing on empowerment of the poor. Other features of the programme that contribute to empowerment include the development of farmer associations, the decentralisation and devolution of Public Administration, a commitment to increase transparency and deepen the process of participation in Public Administration, and a fundamental commitment to consolidate democracy and respect for human rights.

Budgetary Implications

29. The medium-term fiscal scenario (CFMP) is a tool for identifying priorities and allocating budgetary resources to critical programmes to achieve the objective of poverty reduction. The CFMP has a prioritisation of activities reflecting detailed work carried out by the sectors. Budgetary expenditure focuses, firstly, on education and health, roads, water, rural development and agriculture, strengthening of the legal and judicial systems and public safety, and on capacity-building for public administration. Expenditure will focus on regions with the greatest population and highest levels of poverty.

Consultations

30. Consultations carried out after the elaboration of the 1^st draft of the PARPA contributed significantly to the final version, in the following ways:

1. Confirming the choice of the fundamental areas of action.
2. Emphasising the importance of Good Governance, in particular the issues of deconcentration and decentralisation to allow for participatory planning at the local level, in the districts. In participatory district planning lies the hope of a more effective consultations, involving a decisive process geared towards concrete action. This process will be more effective in involving the most disadvantaged strata of society in the determination of priorities to be pursued.
3. Highlighting the need for the State to be more effective in delivering on the options taken and the programmes, plans and commitments adopted.
4. Highlighting the importance of the fight against corruption and the need to change attitudes of the public institutions and their agents in relation to the citizens and their institutions.

31. In relation to the process of consultation referred to above, the following are worthy of note:

1. A degree of fatigue was noted about the frequency of consultations on various issues. As a corollary, the consultations made clear that priority must be given to the implementation and delivery of action by the State.
2. Objections were raised about public policies in areas such as agricultural marketing, the promotion of agro-industries, the nurturing of a national entrepreneurial class, and the development of financial services (to reach the rural areas, the poorest and the nascent national entrepreneurial class). There was an appeal for greater State intervention in these fields. The issues raised deserve the attention of the State in the context of seeking to ensure the adequacy of the policies being pursued.

Institutional framework of the PARPA

32. The PARPA is a medium-term programming instrument of the public planning system. The institutional framework is given in the tables that follow.

II. Characteristics of Poverty: Concepts and Perceptions

33. What is poverty?
    1. The reduction and elimination of poverty is the principal objective of development policies in the medium and long term. However, in discussing poverty, different ideas often arise as to its meaning. This is because poverty is a complex, multi-dimensional phenomenon with diverse characteristics.
    2. As one can surmise, there has been a long debate about how to define poverty, and how to measure it. In the literature, poverty was defined for many years in terms of a lack of income (in money or in kind) necessary to ensure access to a set of "basic needs". With the passage of time the concept of poverty has been redefined to mean not only the lack of income, but also the lack of access to health, education and other services. In recent decades the definition of poverty has expanded to include aspects such as powerlessness, isolation, vulnerability, and social exclusion, amongst others.
34. Poverty as a multi-dimensional phenomenon
    1. In the study on the poverty situation in Mozambique (Understanding Poverty and Well-being in Mozambique, First National Assessment: 1996-97), and in subsequent official documents (PARPA 2000-2004), poverty was defined as the inability of individuals to ensure for themselves and their dependants a set of basic minimum conditions for their subsistence and well-being in accordance with the norms of society. This same studies used consumption per capita (the total consumption of the family household divided by the number of members) as the basic measure of individual well-being for the following reasons:
       • Consumption is the most appropriate indicator or measure of actual wellbeing (while income is a measure of potential wellbeing given that it may or may not be used for consumption);
       • Consumption is a more precise and stable indicator since it is less subject to fluctuations over time.²

Therefore, individuals are classified as poor or not poor in terms of a poverty line defined in terms of per capita consumption.³

Box 1. What is Poverty?

*Note: Official definition adopter from the poverty analysis study.

2. Despite consumption per capita being used as a measure of well-being, one must recognise the importance of indicators that are not based on consumption, such as rates of illiteracy, mortality rates, and percentage of population with access to clean drinking water, amongst others which are normally taken into account in broader definitions of poverty (see Box 1). These indicators, which together are used to determine the Human Poverty Index in accordance with UNDP methodology, are essential for highlighting various dimensions of poverty complete the poverty profiles. Studying the correlation between these and other variables contributes to a clearer picture of the aspects most relevant to the case of Mozambique.

35. Qualitative perceptions
1. Poverty surveys often focus on defining poverty lines and profiling on the basis of data collected through conventional surveys, with an emphasis on quantitative aspects and averages derived from a sample of households. However, it is also very important to determine how these profiles correspond to what the people understand as constituting poverty, and their perceptions, obviously subjective but based on direct experience, of what it means to be poor. Other qualitative and participatory survey methods take into account these dimensions of poverty that are frequently overlooked. Participatory Poverty Diagnoses and Participatory Rural Appraisals, based on quick and low-cost surveys, are normally used to carry out this kind of research.
2. In Mozambique a Participatory Poverty Appraisal (APP) was undertaken, based on a series of participatory qualitative studies carried out in 18 districts, which preceded the National Poverty Assessment based on the Household Survey (IAF) of 96/97. These studies, organised by the Population Studies Centre at Eduardo Mondlane University (CEP-UEM) in collaboration with the Ministry of Planning and Finance and other institutions, were carried out between 1995 and 1996. In January 2001, a series of participatory diagnoses of poverty, organised by the MPF in collaboration with the UEM, were carried out. 21districts in 7 provinces (Cabo Delgado, Nampula, Zambezia, Sofala, Tete, Inhambane, and Maputo province). Only the preliminary results of these diagnoses are currently available. The final results will be analysed and taken into account in the development of future profiles and poverty reduction plans. At the moment, it is possible to state that no significant differences were found between the first and the latest evaluations. Some results of the participatory studies follow.
3. The development of a poverty profile was complicated by the existence of a widespread hegemonic discourse that "all were poor". However, in terms of perceptions of poverty, variations were found depending on those being surveyed. The factors mentioned in determining whether a person was considered poor or not may be divided into three groups: material goods; sources of income; and social relations/civil status. Distinctions were also drawn between the poverty of individuals, families, villages and regions/districts. Communities frequently referred to three groups (the poor, the middle group and the rich), though the material possessions characterising each group varied significantly between different communities. Hence, the perceptions of stratification and poverty were related to the surrounding socio-economic and cultural context. In terms of the frequency of the factors mentioned, for most people the poor are those who are unable to work because of physical handicaps, age or illness or civil status (widows); in other cases poverty is seen to be a case of working very hard but suffering from low income due, for example, to adverse climatic conditions and lack of means, or to be associated with one or another extreme symptom such as famine. In addition, there were views of poverty based on family origin, as a kind of predestination. But there is also a more materialistic understanding of poverty, seen as the lack of essential goods such as sufficient food or clothing, or not having children, or not having an alternative source of income. In the most recent diagnoses, the aspects most frequently mentioned as contributing to social status (poverty/wealth) were, amongst others, the following (in descending order): ownership of livestock; employment (working for others); ownership of a bicycle; ownership of a car; ownership of clothing and its quality; ownership of money, access to credit and goods to sell; ownership of a shop or stand; access to foodstuffs (quantity and quality). On the other hand the target groups, when discussing the poverty of communities (and not of individuals), also pointed out the lack of basic infrastructure, (roads, markets, transport), low agricultural productivity and the lack of welfare organisations as both symptoms and causes of poverty.
4. With regard to causes, in the 1996 assessments there was frequent reference to the war as a determining factor in explaining the current conditions of the poorest segments of the population. "Ignorance" and adverse climatic conditions were also considered to be causes of poverty. In the most recent diagnoses, less emphasis is given to the war, and more reference is made to the lack of support (social support, support from the Government and other institutions), the lack of employment opportunities, limited access to financial services, problems with marketing, or inability (due to physical or mental factors) to work, as the principal causes of poverty. The phenomenon of displacement (a result of the war) and the closing of factories were also highlighted. The latter was particularly raised in areas where employment in factories was until recently the major source of cash income. In both sets of diagnoses other explanations were put forward, such as divine will, which meant that a person was predestined to be either poor or rich. At the same time there appeared to be concentric circles of poverty and misery. In fact, the closer one is to the administrative headquarters there is more infrastructure, a greater government presence, more food aid and the further away one is from the administrative headquarters the less infrastructure, shops, less government presence, in sum greater abandonment.
5. Finally, in terms of priorities, differences in established priorities may be linked to the age of those interviewed, their gender, wealth, and position in the power structure. The poorest tend to give priority, in terms of development activities or problems that need to be dealt with as a matter of priority, to the following in descending order of importance: transport, roads, prices, marketing of products, access to land and water and the introduction of motorised flour mills. These are, in sum, activities that increase the returns from their agricultural production, improve their terms of trade or their chances of participating in the market, and reduce the need for labour, which is always a limiting factor. The most recent diagnoses emphasise the need for basic social services, in particular the lack of accessible health posts, the lack of means to transport the seriously ill (ambulances), and the lack of personnel. There were accusations of corrupt practices amongst school teachers in some areas. The importance of water supply was constantly referred to in the districts visited. In many cases this problem is a result of the non-functioning of existing infrastructure due to the lack of maintenance of the equipment (such as pumps) and the lack of fuel.
36. Why and how to measure poverty
1. The measurement of poverty is one of the first steps, which should guide the definition and implementation of policies, and allow comparisons to be made between areas and over time. Comparisons between poverty levels can be made between two different moments in time (for example, compare 1995 and 1985) or the effects of poverty on two sub-groups of the population (for example rural and urban) or between two different situations in terms of policies adopted (for example, with or without subsidies).
2. In the National Assessment, basic minimum conditions were identified in terms of an absolute poverty line, constructed as the sum of a food poverty line based on nutritional standards of approximately 2,150 calories per person per day, plus a modest amount of non-food expenditure based on consumption by households that suffer from food insecurity. In monetary terms, the national poverty line was fixed at 5,433.00 MT per person per day, after weighting the various provincial poverty lines and adjusting them to reflect variations in the cost of living.⁴ In addition, the concept of destitution (or abject poverty) was considered, characterising those who are unable to satisfy their daily calorie requirements (representing 60% of the base poverty line) (MPF 1998).
3. Three measures were used in the assessment studies on absolute poverty in Mozambique:
• Headcount index
• Poverty gap index
• Squared poverty gap index
The headcount index measures the proportion of the population defined as poor, i.e. those whose consumption (or any other indicator used to measure living standards) is below the poverty line. The poverty gap index is defined in terms of the average distance below the poverty line expressed as a proportion of that line, where the average is based on the total population, and counting the non-poor as having a poverty differential equal to zero. With this second index it is possible to measure changes in the income of the poor (increases or decreases) even when the headcount index remains unchanged. The third measure, the squared poverty gap index is defined as the average of the square of the proportional poverty deficits, and is sensitive to inequalities between the poor and to changes in these inequalities.

37. Results of the analysis of data from the IAF of 96-97 indicate that poverty levels in Mozambique remain extremely high. As one can see in Table 2.1, the average monthly per capita consumption was estimated at 160,780.00 MT, or around US$170 per annum using the prevailing exchange rate at the time of the survey. The rate of absolute poverty stood at 69.4%, which meant that more than two-thirds of the Mozambican population was living below the poverty line. There was a greater incidence of poverty in rural areas (71.2%) where 80%⁵ of the population lives, as opposed to 62.0% in urban areas.
38. As one can see from Table 2.2, given the concept of poverty used, the incidence of poverty at the provincial level is most marked in Sofala (87.92), Inhambane (82.60) and Tete (82.27). The prevalence of destitution (abject poverty)⁶ follows the same pattern, being highest in Sofala (65.19), Tete (53.60) and Inhambane (53.73). Maputo city shows the lowest levels of both poverty and abject poverty, while the least poor province in terms of per capita consumption is Cabo Delgado.
39. Table 2.3 presents non-consumption welfare indicators that are important in themselves. These indicators show that three out of every four Mozambican women are illiterate, that the vast majority of the population does not have access to clean drinking water, and that infant and maternal mortality rates remain high. There is substantial inequality between the welfare levels in urban and rural areas, given that the welfare indicators are significantly lower in the latter.
40. Table 2.3 also presents comparisons between the prevalence of absolute poverty based on average consumption per capita, and the prevalence of human poverty based on other indicators of wellbeing (life expectancy, education, sanitation, clean water, etc). In fact, some provinces show large differences in terms of their position in relation to the consumption poverty index and the human poverty index (see Box 1 for definitions). For example, Cabo Delgado is the only province where the human poverty index is higher that the consumption poverty index, while Sofala, Inhambane, Tete and Maputo provinces show the highest relative differences between the index based on consumption and the human poverty index (between 25-35 percentage points higher in terms of consumption). Logically, these differences may be partly explained by the existence of, and access to, social infrastructure (education and health) and in the proportion of the urban population.

Table 2.1. Average consumption and poverty estimates by zone and region

Source: (GOM 2000:13)

* Abject poverty corresponds to destitution, i.e. those whose per capita consumption is 60% below the poverty line.

Source: MPF 1998

Source: (GDM 1999, INE 1997, INE 1999, PNUD 2000) The data refers to 1997. A/ data for the regions (North ,South, Centre) are from UNDP 2000).

41. Decision-makers and planners need trustworthy and up to date information on poverty – for example, the number of households living in poverty, their composition in terms of age and sex, their geographic location and their employment situation, amongst other aspects.
42. The poverty profile provides a quick synthesis of the situation to politicians and those responsible for planning, as well as other interested persons. It has proved to be a useful instrument for the development of effective policies and programmes. Therefore the profile of characteristics identifying the poor includes location (rural or urban), occupation (farmers or workers), gender (households headed by men or women), and employment situation (employed, unemployed, casual workers).
43. National Profile
    The profile presents the scale of poverty and its distribution amongst various socio-economic groups, and provides information on the characteristics and heterogeneous nature of the poor.⁷ In general there are important differences between urban and rural areas, with the latter being poorer and less endowed with basic infrastructure. In brief, the profile highlights the following principal points (see Table 2.4):
    1. Demographic characteristics. Poor individuals tend to live in larger households that the non-poor. The poor have more children that the non-poor and start having children earlier. Poor households have approximately twice as many dependants as the non-poor, and so their dependency rates are significantly higher than non-poor households. In regards to the feminisation of poverty, data from the IAF does not support this hypothesis a priori, given that there is not a higher proportion of female-headed households amongst the poor when compared to non-poor households.⁸ Only in the case of widows and divorcees in urban areas is there a significant difference, which supports the gender hypothesis. Nevertheless, multiple regression analysis does tend to indicate that the link between the gender of the household head and consumption per capita (controlling for other variables) is negative in the case of female-headed households. Gender disparities, above all in rural areas, are a notable feature in many countries. This implies the need to deepen the analysis of the poverty profiles in Mozambique through a gender perspective, hopefully producing information that will improve policies for fighting against poverty.⁹
    2. Education. The relationship between education and poverty is significant. However, differences between the poor and non-poor are often less significant than between sexes and between place of residence. Women and rural areas tend to be worse off. This means that a poor child in an urban area has a better chance of attending school than a non-poor child in a rural area; and in rural areas, a poor boy has a stronger probability of attending school than a non-poor girl. There is also a strong relationship between the level of education of the household head and the state of poverty of the household: households headed by those with a higher level of education tend to be less poor. This relationship is particularly strong in urban areas and in female-headed households.
    3. Health and nutrition. In rural areas, access to health services is approximately the same for the poor as the non-poor. However, in urban areas the non-poor have better access to formal health services than the poor. The proportion of children between 6-11 months who have not been vaccinated is significantly higher in rural than in urban areas. Chronic malnutrition amongst children below the age of 5 is also higher in rural areas.
    4. Agriculture and land ownership.¹⁰ Almost all rural households have access to at least a plot of land to farm (machamba), compared to less than half of urban households. The poor and non-poor have approximately the same amount of land per household, but the non-poor tend to use more equipment (inputs) and to have more irrigated land than the poor. Nevertheless, the use of equipment and inputs is very low and this is reflected in low levels of agricultural productivity in the country. Land is not, therefore, a limiting factor for poor peasants, but rather their capacity (and therefore means of production) to work the land which they have, and achieve acceptable levels of productivity. Maize and cassava are the most common crops for both the poor and non-poor, while cash crops are of relatively marginal importance: the non-poor tend to cultivate more cotton and cashews, but nevertheless only low percentages of the non-poor do so (6.1% and 26% of the non-poor, respectively). This is reflected in the low levels of marketed output with, in general, less than 10% of households in each category (poor and non-poor) selling surpluses of maize, cassava or cotton.
    5. Employment. While in urban areas the non-poor tends to work more for wages than the poor, in rural areas there is difference in this respect. In these areas it is not so much employment itself, but other factors such as the amount of wages or the number of dependants, that are the main determinants of poverty. In rural areas almost everyone works in the agricultural sector, but this is especially so in the case of the poor. In urban areas less than one third of the non-poor work in agriculture, and this group is most present in "trade and services" and "public services".
    6. Access to basic social services. In rural areas there is no substantial difference between the poor and non-poor in the type of water source and sanitation used, since the population as a whole is dependant on wells, rivers and lakes, and latrines. In urban areas, however, the non-poor tends to have access to piped water and a health network, while the poor depend more on standpipes and public wells. In rural areas the distance from various services (e.g. schools, doctors, nurses, markets, telephones etc) is the same for the poor and non-poor.
44. Provincial profiles
    1. The provincial profiles fill the need to reflect the regional diversity of Mozambique. Regional and provincial differences in various socio-economic indicators (consumption per capita, the relative weight of the economic sectors, infant mortality rates, access to clean water, health, levels of education, etc) are often important, though there is still an overall deficit for all provinces and in terms of the various indicators.
    2. Among the main similarities, the dependency rate and household size should be noted as the most evident characteristics of the poorest households. In practically all provinces, the poorest households support a larger number of dependants without sources of income.
    3. Graph 2.1, for example, illustrates the existing differences as regards infant mortality rates, which is a good indicator of living conditions, especially for health, in various areas of the country. Zambezia, Cabo Delgado and Nampula, which have the highest population densities in the country (in total they represent nearly 50% of total population), have the worst infant mortality rates, three times higher than Maputo city.

Source: INE (1999)

These provinces also show the highest illiteracy rates and gender disparities in access to basic education and health services (see Table 2.3). As a result, they also have the highest rates of human poverty (UNDP, 2000). However Sofala province, which has the highest rates of prevalence and depth of poverty in terms of per capita income, nevertheless in terms of education, access to piped water and levels of child malnutrition is significantly better than the northern provinces and Zambezia.¹¹

4. In terms of the marketing of agricultural produce, in those provinces with the greatest agricultural potential such as Nampula, Zambezia and Cabo Delgado, the poorest households have much lower rates of marketing their output than do the less poor (see poverty profiles for these provinces). The use of agricultural inputs is extremely low in all provinces and in the country as a whole, but the poorest households apply almost none of the main inputs, nor do they contract labour. This directly results in particularly low agricultural productivity.
5. Obviously, one of the clearest similarities relates to the fact that the poorest households suffer more from unemployment and underemployment, including those in rural areas with the best agricultural potential. On the other hand the importance of the various productive sectors varies a great deal, with agriculture constituting the most important activity in the northern provinces and Zambezia and being less so in provinces such as Sofala and Maputo (province and city).
6. In general, poverty levels are considerably higher in rural as opposed to urban areas, with the exception of Cabo Delgado, where the incidence of poverty in terms of per capita consumption is higher in urban areas. There are various explanations for this, running from the definition of what constitutes an urban area to the importance of self-consumption of the most readily available agricultural products in rural areas, amongst others. However, the incidence of human poverty in the rural areas of Cabo Delgado is amongst the highest in the country, which reflects again the various dimensions of poverty, which must be taken into account.
7. In terms of all comparisons, the situation of Maputo city is very different, having as it does significantly lower poverty rates (in all dimensions) than the rest of the country. Job and income opportunities are greater, and in many cases the best social infrastructures are concentrated in the capital city. However, the question of poverty does not lose its importance in the case of Maputo city and, despite its urban nature and its specificity, many aspects reflected in other profiles are still present: high rates of dependency, low productivity, gender inequalities in education, poor infrastructure in peri-urban areas, etc.

¹ The dependency rate is the sum of those members of the household that are less than 16 years old or older than 59, plous those with physical or mental deficiencies, divided by the total number of individuals in the household.
² Only for those who were sick.
³ Other = cooperative sector, employer and domestic servant.

45. The poverty profiles represent a first attempt at understanding the potential causal factors underlying poverty. Such analysis may be strengthened with the use of multivariate regression techniques combining quantitative and qualitative variables. On the basis of the data of from IAF 1996/97, the following determinants of poverty in Mozambique were identified (MPF 1998):
    • Slow economic growth until the beginning of the 1990s.
    • Poor levels of education of economically active members of households, especially women.
    • High dependency rates in households.
    • Low productivity in the family agricultural sector.
    • Lack of employment opportunities in the agricultural sector and elsewhere.
    • Poor development of basic infrastructure in rural areas.
46. Other studies (World Bank 2000) also emphasise factors such as the isolation of communities due to lack of adequate roads, and therefore poor integration of rural markets to allow for the sale of agricultural surpluses.
47. Sufficient data is not available to determine the evolution of poverty over the last few years, and the extent to which the changes that have taken place and the rapid economic growth over the last few years have influenced trends in the prevalence of poverty. Table 2.5 presents a forward and backward simulation based on data from the IAF 1996/97, taking into account the poverty line and changes in real consumption per capita. The period 1987-1997, which was one of weak growth (an cumulative increase of only 6% in real consumption per capita) probably saw a very modest fall in the prevalence and depth of poverty (4.4% and 8% respectively). In contrast, for the period 1997-2001, if the projections are correct, there will be a considerable reduction in the prevalence of poverty (7.3% cumulative) over only four years. Besides these simulations, which suffer from well-known methodological and statistical limitations, there are other indicators, which also indicate a positive trend since 1994, which coincides with a period of accelerated economic growth. These indicators may well reflect, in themselves, relatively positive changes in the average living conditions of the population, including the poorest (see Table 2.6).

¹ The simulations are based on the assumption of a growth in private per capita consumption with a neutral distribution, that is, it is equal on average for the whole population. This assumption will especially affect the results of the depth of poverty (differential poverty).
² For the years 2000 and 2001 the most recent projections of the IMF were used.

Source: MPF 1998 and IMF

Source: INE (Various annuals, 1997 Census, Statistics and Social Indicators); MINED; UNDP 2000, IMF 2000

48. Following the presentation of results from the first national and provincial poverty assessment in Mozambique, research continues with a view to deepening knowledge and filling the gaps in existing information.. At this time, research is being carried out in three main areas:
    1. Alternative methods for measuring poverty, the selection of poverty lines, and the implications in terms of prevalence rates;
    2. Analysis of the incidence of basic services in health and education, and public expenditure in these areas for various income groups, to evaluate progressivity of the supply of these services;
    3. Poverty mapping, to identify with greater precision the location of the poor.
49. Alternative methodologies for establishing poverty lines
    1. The choice and establishment of poverty lines is one of the most complex and problematic tasks in the development of provincial profiles. There are various methodologies, each with its own problems and advantages. In general, the principles of consistency and specificity are vital to ensure that comparisons are acceptable, particularly in the case of Mozambique, a vast country with inter-regional and inter-provincial differences.
    2. In the study on alternative methodologies for defining poverty lines (FEI or CBN),¹² data from the IAF 1996/97 was used to test six different measures to establish the extent to which the choice of one or another affects rural-urban and inter-provincial comparisons. The following results may be highlighted:
       • The choice of methodology affects the profiles and geographical distribution of poverty (rural/urban, provinces), but the Cost of Basic Needs methodology is more robust;
       • The characteristics of the poor (size of household, dependency rate, education, access to land) are, in general, constant with respect to the choice of various poverty lines;
       • The measured characteristics of poor households are more reliable when averaged, in that geographical distinctions are more sensitive to the choice of method used to define the poverty line.
50. Analysis of the incidence of health and education benefits in Mozambique
    1. The purpose of this study is to determine the progressivity of health and education benefits, that is, of basic services provided and expenses incurred to reach the population. The study combines the costs of providing basic services with data on utilisation of the various services by the population. Studies carried out in other African countries show that the distribution of public expenditure on these services is highly unequal, and that the poor benefit much less from this expenditure than the non-poor.
    2. The main conclusion of the in Mozambique is that the benefits of education and health are distributed with a view to improving the living conditions of the poor, or in other words, the poor tend to benefit relatively more than the non-poor. In terms of primary education, the benefits curve is progressive, so there is discrimination in favour of the poorest, while in terms of secondary education the distribution is slightly in favour of the less poor (precisely because of the lack of secondary school infrastructure in rural areas). In regards to health services (vaccinations and consultations) the benefits per capita curve tends to be either equal or progressive, to a certain extent due to the large number of household members that use these services (as in the case of primary education). Therefore, investments in health and education can have a significant direct impact on the poor population due to existing deficits on the one hand and the progressive distribution of benefits on the other.
51. Poverty mapping
    1. The mapping of poverty is underway and aims to bring together data from the IAF 1996/96 with the Census of 1997, to identify pockets of poverty in the country down to the district level. In fact, one alternative for public intervention in the fight against poverty is to select some areas with disproportionate levels of poverty in relation to the national and provincial averages. Participatory diagnoses of poverty at community level normally show the existence of pockets of poverty, distributed throughout various provinces and independent of the aggregated differences from one province to another. In order to reach down to the level of local communities, it is necessary to know the situation of each district and the absolute poverty prevalence levels in each case. Therefore, thanks to the mapping of poverty, it will be possible to identify with greater precision those areas of the country, which suffer from the greatest poverty and to direct priority actions to those areas.

III. The Demographic, Macro-Economic and Territorial Context

52. The demographic context provides a framework for harmonising the national objectives and targets for poverty reduction with those at a regional, sectoral, provincial and local levels. With an understanding of the demographic and economic dimensions, one can assess the efforts needed to realise the objective laid down in the Action Lines for reducing by 30% the incidence of absolute poverty during the first decade of the new millennium.¹³
53. Before factoring in the impact of AIDS, Mozambique’s population may reach around 19.4 million inhabitants by 2004, distributed on a regional basis as follows: 34% in the North, 45% in the Centre, and 21% in the South (including Maputo city). This population growth reflects a combination of the main components of demographic dynamics, namely forecasts of population growth and birth and death rates.
54. Taking into account the impact of AIDS over the same period (up to 2005), the population may reach 18.1 million, i.e. a loss of around 1.3 million as a result of AIDS. In regional terms, it is expected that the Central region will be most affected. Of the total of 1.3 million probable deaths, around 69% will be in the Central region, 18% in the North and 13% in the South (including Maputo city).
55. Developments in terms of life expectancy during the five-year period 2000-2005, before factoring in the impact of AIDS, would be in the order of 4 years, i.e. an increase from 42.3 years in 1997 to around 46 years in 2005. With the impact of AIDS, estimates indicate that life expectancy, rather than increasing by 4 years, might in fact fall to 35.2 years by 2005.
56. High fertility and dependency rates are two other important indicators that have an impact on the levels of poverty in Mozambique. A reduction of around 7% in the fertility rate in relation to 1997 is forecast (from 5.9 children per woman to 5.3 in 2005). It is assumed that this reduction will result from socio-cultural mechanisms of population reproduction.
57. Regarding dependency rates, economic and social policies have to take into account the very young age structure of the Mozambican population. The high proportion of dependants, above all children and young people, is typical of a developing country. This young age structure of the Mozambican population predetermines the supply of labour, as well as the size and proportion of school age children, specific requirements for health services and a range of other consumption and welfare requirements. These aspects should be taken into account by all relevant sectors to ensure that sectoral plans take into account the tendencies and dynamics of the demographic structure and its variables.

Macroeconomic performance

58. Between 1996 and 1999 Mozambique registered very positive macroeconomic performance. Inflation fell to single digit figures and the annual growth rate of real GDP was above 10%, while investment reached an average of around 27% of GDP. The growth was broadly-based, including 9% growth in agriculture and animal husbandry (led by the family sector) and 18% in industry (excluding mega-projects). The annual average growth in private consumption was around 7%. These favourable tendencies were the result of two key changes: the transition since 1992 to a period of peace and stability; and the economic reforms begun in 1987, which substituted an economy driven by market forces and private enterprise for one previously based on central planning. Through these reforms, policies were pursued to correct the principal domestic and external imbalances.
59. This macroeconomic performance suffered a setback in 2000 as a result of the floods at the beginning of the year, which particularly affected the centre and south of the country. Despite reconstruction efforts, preliminary estimates indicate that economic growth will fall to 2.1% for 2000, while inflation will rise to 11% (also due to oil price rises and a rapid growth in money supply). An additional consequence of the floods can be seen in the fact that 2000 and 2001 are exceptional in terms of the availability of budgetary resources. This is a reflection of the extraordinary level of donor support for the emergency and post-flood reconstruction programmes.
60. These deviations from the general trend are, in principle, temporary, since a growth of around 10% in GDP is forecast for 2001, while the target for inflation stands at between 5%-7%. In the medium term, the objective is to maintain a broadly-based GDP growth rate of not less than 8% per annum, increasing national income per capita and private consumption by at least 5%, with an inflation rate of between 5%-7% per annum. Total budgetary resources will drop to normal levels, with a greater mobilisation of domestic resources and less dependency on external financing (as a percentage of GDP). The main features of the macro-economic scenario are summarised in table 3.1.¹⁴
61. These macro-economic objectives are ambitious but achievable under the following scenario:
• Peace and political stability;
• Prudent macroeconomic and financial management;
• Strong investment in education, health and infrastructure;
• Substantial productivity gains in agriculture, particularly in the family sector, resulting in an average annual growth rate for the whole sector of around 8% (with low capital input requirements);
• Strong improvement in the functioning of market-supporting public institutions, including legal/judicial reform and the reduction of red tape;
• Deeper structural reforms in other sectoral programmes;
• Continued support from international partners, maintaining the recent high level of net transfers;
• Phased implementation of mega-projects that are at an advanced stage of planning and have a high probability of being implemented, involving new investments estimated at US$ 6 billion.¹⁵
• A rapid growth in exports, starting from a low base (see Table 3.1), rooted in an expansion in the production of cash crops (in particular cashew nuts and cotton), a large boost from the mega-projects, and maintenance of a competitive exchange rate;
• Continued liberalisation of foreign trade, in particular within the SADC region, and expansion of trade flows through the main transport corridors;
• Rapid and inclusive growth of trade, transport and non-government services (including construction), boosted by agriculture, foreign trade and public works.
62. An important factor that has not been included in the current analysis is the macroeconomic impact of HIV/AIDS. Two studies on the issue will be finalised this year and the results taken into account in future projections. On the basis of recent studies in other countries of the region (where the rates of infection are higher than in Mozambique) the effects here in the medium-term may be a fall of 1% per annum in the GDP growth rate. The per capita growth may fall by less than 0.5% per annum over the period 2000-2010.¹⁶

63. In addition to the impact of HIV/AIDS, economic growth may also be lower than projected in the programme as a result of risks arising from natural disasters or from irregular or unpredictable flows of external finance. On the other hand, growth could be higher than 8% if the effective implementation of the programme successfully encourages foreign investment at higher levels than those projected. In light of these uncertainties, macroeconomic projections will be revised annually to incorporate the best and latest information, as well as changes in the key macroeconomic variables.



The connection between economic growth and poverty reduction

64. A basic premise of the present strategy is that rapid, sustained and broad-based growth is essential for the reduction of poverty. Therefore the strategy incorporates policies and reforms necessary to stimulate growth, as well as direct measures aimed at providing better opportunities for the poor.
65. The target 8% average annual growth rate will create conditions for reducing the incidence of absolute poverty from around 70% to less than 50% by 2010. In this scenario, the average level of consumption for poor families will double in 12 years, and quadruple by 2025. This growth has a similar affect on the provision of public services to the poor. Currently, public expenditure on education, health agriculture and roads represents 42% of the State budget and around 10% of GDP – around US$24 per capita. Only modest improvements can be achieved through a reallocation of public expenditure and efforts to increase revenue. Only with rapid economic growth is there the possibility of doubling resources for essential public services over the next decade. In sum, rapid growth can provide material benefits and better public services to the poor, which would otherwise be impossible to achieve.
66. These linkages reflect lessons from international experience. Countries, which have been unable to sustain significant growth in income per capita, have also failed to reduce poverty. By contrast, each of the 7 countries which sustained high rates of growth between 1970 and 1995 - including our regional neighbours Botswana and Mauritius – also achieved significant reductions in absolute poverty, and corresponding improvements in the quality and coverage of public services. With appropriate policies, Mozambique is in an excellent position to emulate these extraordinary achievements.
67. It is obvious that the poor do not automatically benefit from good "macroeconomic statistics". Therefore, the strategy must ensure that the structure of growth favours the poor. This will be achieved by increasingly allocating public resources to programs, which strengthen the capacities of, and opportunities for, the poor.
68. It is important to take note of the fact that the link between growth and poverty reduction works both ways. Rapid growth contributes to human development, and at the same time, measures to develop capacities and opportunities for the poor contribute to rapid growth. Since the relationship works both ways, a well conceived strategy to achieve human development and economic growth can produce a "virtuous cycle" of accelerated progress in the urgent fight against poverty. In many ways policies to promote economic growth and human development are one and the same thing.

69. The fundamental macro-economic determinants of growth are: first, a high rate of investment in physical and human capital; and second, rising productivity. Physical investment includes both public and private capital formation. It is private investment that will serve as the main engine of growth. However, growth also depends greatly on complementary public investment in productive infrastructure. In addition, private investment is influenced by government policies and institutions, which affect the risks and the returns on doing business in Mozambique. Therefore, the Government plays a vital role in providing goods and services, and creating a favourable environment for private investment in the economy. Investment in human capital consists primarily of expenditure on education, health and training, and involves both public sector programmes and private initiatives. Finally, productivity gains (increases in efficiency) arise as a result of a complex process involving technical, organisational and managerial changes and innovations at the level of firms and other institutions; structural changes which reallocate factors of production to more efficient activities and sectors; financial institutions which channel savings to those investments with the highest rates of return; and learning activities, involving education and training, research and information technology. These processes are decisively influenced by government policies and institutions.
70. International research provides strong evidence that certain aspects of public policy are particularly important for fostering rapid and sustainable growth through their impact on investment and productivity. One basic condition is the maintenance of peace and political stability. Other fundamental factors include:
    • Investments in education, health and infrastructure. Special attention must be paid to the fight against HIV/AIDs and the promotion of gender equity.
    • The quality of market-supporting public institutions, including an effective regulatory, legal and judicial system, the elimination of red tape, effective efforts to eliminate corruption, and the transformation of public administration to be more effective in facilitating private initiatives.
    • Macro-economic policies such as prudent and consistent fiscal and monetary management; outward-looking trade policy, with an emphasis on the promotion of exports; and the development of healthy and efficient financial markets.
71. Besides an effective collaboration between the State and the private sector, the strategy for rapid and sustainable growth also depends on maintaining a constructive partnership between domestic and foreign resources. The people of Mozambique are the main agents of growth, and the only beneficiaries of importance in the process of developing the government programme. However, international partners play a key-supporting role in complementing our capacity and increasing our chances of success through the provision of aid, investment, technology, qualified workers and managers, and access to vast potential markets.

72. To ensure that growth will favour the poor, the strategy involves two basic components. Firstly, the measures adopted to promote rapid growth will be designed and implemented with a strong focus on involving and benefiting the poor. This applies not only to education, health and infrastructure – where the programme emphasises the importance of the balance between regions and the need to focus service provision on areas with a high concentration of poverty – but also to institutional reforms and the development of financial markets. Even the issue of macroeconomic stability is vital for the poor, since families struggling for subsistence are the most vulnerable to adverse effects of an economic crisis.
73. Secondly, the strategy gives priority to structural policies that stimulate equitable growth. Four critical components of this approach are policies aiming to:
    1. Raise the productivity of, and develop markets for, small producers in rural family agriculture (given that around 89% of the po