How institutions matter in Mozambique

Launched in 2015 and completed in 2022, the Institutional Diagnostic Project aimed at identifying institutional factors that affect development, reforms that may help address existing institutional constraints, and factors that can preclude or enable these reforms.

Using the motto ‘institutions matter’ as a starting point, the project sought to establish how institutions matter and to fill in the existing gap in knowledge about how institutions form and how they may be reformed in particular contexts. The research programme took an inductive approach to the institutional diagnostic rather than adopting a pre-designed diagnostic framework; comprising exploration of the links between existing institutions and the development trajectories of four different countries, Bangladesh, Benin, Mozambique, and Tanzania. 

The book Mozambique at a Fork in the Road is one of these case studies. The task of identifying institutional barriers to long-term inclusive and sustainable development is challenging; even more so given that Mozambique is unique in many ways, as described in the book. Geographically a big and diverse country, there is a lack of economic and physical infrastructure to underpin integration, and a critical dependence on geopolitical factors, including its proximity with South Africa.

Compared to many other African countries, independence came late, in 1975, a period characterised by a strict Marxist-Leninist regime and the conflict between Frelimo and Renamo, which intensified in the early 1980s. Frelimo has been in the political leadership for over forty-five years and political opposition has lacked capacity. Moreover, the divergence between Frelimo and Renamo continued and recently intensified, as portrayed by the armed insurgency in the province of Cabo Delgado.

Mozambique has also been critically dependent on the donor community. The structural adjustment programme imposed by Bretton Woods institutions, among other donors, in the late 1980s, led Mozambique to follow market-based reforms when the country was at war and the economy could not respond to market incentives. Foreign assistance was critical after peace in 1992, and remains a crucial factor in Mozambique’s modern history. Mozambique at a Fork in the Road delves more deeply into this historical and political context, and the institutional constraints to economic development.

A central element of this task includes the contributions of a select group of highly informed authors on thematic areas, deemed as key to a comprehensive institutional analysis of economic development in Mozambique. They range from agriculture, education or health to the donor relations and the importance of the extractives sector, as well as covering topics related to political institutions.

The institutional diagnostic highlighted a series of important institutional constraints and identified possible causes. Namely, the importance of the agriculture sector, which has not been prioritized enough, for inclusive and sustainable development, and the possible dangers of a very large extractive sector. On the political front, frequent shocks and changes in the policy strategy have undermined the establishment of a clear national development vision. Moreover, lack of citizens’ voice and of separation of powers, coupled with a fragile political opposition, weaken the trust in government and its accountability. Moreover, there has been a progressive move from aid dependence to increased complexity in the relationship with donors, which continues to evolve, also with the heightened interest of new powerful foreign investors.

As suggested by the title, the book highlights Mozambique finds itself at a fork in the road, after the discoveries of some of the largest natural gas fields in the world. The choice is between remaining on the present path, with low levels of structural transformation, stagnating productivity in agriculture and lack of diversification, or using the revenues to promote inclusive development and poverty reduction. We hope for the latter and the book concludes with ideas for reform, which can contribute to reflection and debate. 

Finn Tarp is a Professor of Economics, University of Copenhagen and former Director of UNU-WIDER.

Ines A. Ferreira is an assistant professor in the University of Copenhagen Development Economics Research Group (UCPH-DERG).

The views expressed in this piece are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.