Post-Stabilization Economics in Sub-Saharan Africa: Lessons from Mozambique (review)

In a continent that too often generates stories of poverty, stagnation, and decline, it is a distinct pleasure to have a book devoted to a genuine success story. Mozambique (which was, until 1992, the poorest country in the world), has achieved truly impressive growth rates, and with them, rates of poverty alleviation that would be the envy of any country on the continent.

This book contains a series of essays devoted both to explaining how this success was achieved and to providing a benchmark for the performance of the economy fifteen years after the achievement of peace in 1992. It is not a book about how to stabilize a war-torn country; rather, it is a book about what to do after stabilization has been achieved. As such, it is much more about development per se than it is about the purely macroeconomic issues of the immediate postwar, postsocialism phase that Mozambique (and many other countries) had to traverse to get to the point of choosing the macroeconomic policy that would best promote development and income growth for the poor.

Two chapters are devoted to issues of donor aid and its coordination. Two others are devoted to growth and how to sustain it, while two more look at financial and monetary policies and how the achievement of stability contributed to growth. Other chapters detail the effect of growth on poverty, the management of mineral resources, export performance, and the important role of improvement in the business environment. Each provides an extremely useful summary of recent research, against which the performance of Mozambique can be judged.

As the book makes clear, without sound macromanagement, success would have been impossible. It is also clear that international donors have played a major role in Mozambique’s story. While there is no attempt in the book (much less this review) to ascribe credit or blame to the “Washington Consensus” institutions, their influence is clear, though the Mozambican government channeled it in its own desired directions by formulating a clear poverty reduction strategy and asking donors to fund it. The benefits of this were not in its basis in an alternative development model—indeed the Mozambican strategy is one that the “consensus” would find quite attractive—but rather in its determination not to allow each donor to pursue an independent trajectory. However, it is also clear that Mozambique’s success is not primarily due to export-led growth. The chapter on export performance attributes success in this area to a few large megaprojects, rather than to a traditional approach of managing the real exchange rate to encourage response by rural producers. More in line with conventional wisdom are the chapters on monetary and financial policy, which make clear the role of stability in promoting a context within which growth can occur. How this was achieved is a lesson in good management for other countries in similar circumstances.

The chapter on promoting an enabling business environment emphasizes the need for political awareness when implementing reforms. Mozambique did not attempt wholesale across-the-board reforms, trying instead to focus first on changes that could provide short-term success at low cost. This demonstrated both the benefits for entrepreneurs and the government’s determination to follow through with its stated goals. The book emphasizes the need for political awareness and thoughtful sequencing not only in this area, but in financial reforms as well, a lesson that is obviously transferrable elsewhere.

Overall, this book is well worth reading for any serious student of economic policy in sub-Saharan Africa. While not claiming to provide a universal road map for others, it details Mozambique’s path to its undeniable economic success, and so has many useful lessons for policymakers throughout the continent.