Post-Stabilization Economics in Sub-Saharan Africa by Jean A.P. Clément & Shanaka J. Peiris

Author:Jean A.P. Clément & Shanaka J. Peiris
Language: eng
Format: epub
ISBN: 9781452797762
Publisher: International Monetary Fund
Published: 2008-08-15T00:00:00+00:00

Source: Author’s calculations.

Figure 6.4. Mozambique: Macroeconomic Effects of Foreign Aid (Non-Megaproject Exports)

Source: Author’s calculations.

Illustrative Scaling-up Scenarios

The purpose of illustrative scaling-up scenarios for Mozambique is to identify the potential macroeconomic implications and key measures and policies that would help the country absorb a higher level of aid and use it efficiently. A full costing of the MDGs has not been undertaken for Mozambique, but the country appears to be well placed to achieve the income poverty MDG (halving the poverty rate by 2015) with present resources and policies.19 Therefore, we consider the macroeconomic consequences of an arbitrary but moderate and sustained increase of external finance for illustrative purposes.20 This contrasts with scaling-up scenarios presented for a few other countries (for example, Mattina, 2006) based on costing the MDGs and targeting a specific growth rate to meet the income poverty MDG. The focus of this chapter is to discuss the macroeconomic implications and policy trade-offs involved in spending and absorbing a modest scaling up of foreign aid, which currently amounts to about 15 percent of Mozambique’s GDP.

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