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United Nations Development Programme (UNDP) United Nations Capital Development Fund (UNCDF)

Modelling PRSP II & poverty reduction in Mozambique local development:
Econometric analysis of factors determining Millennium Development Goals by 2015


Israel Jacob Massuanganhe

United Nations Development Programme (UNDP) and United Nations Capital Development Fund (UNCDF)

November 2005

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Abstract

Persistent rural poverty is one of the most stubborn social problems facing LDCs. It is difficult to estimate poverty accurately because the concept of poverty is not easy to define and even once it is defined it is not easy to measure in a way that is consistent with de definition.

This paper outlines the regression analysis addressed to determine variables and factors influencing poverty alleviation in Mozambique and estimate their magnitude. The aim of this paper is to support the careful interpretation of poverty estimates and to emphasise the need for policy makers to account for poverty measurement in their work.

The analysis shows that aid support has great contribution in poverty reduction. Mozambique to achieve the MDGs has to grow at least at the level of 8% per year (meaning 14% by 2015), while the budget allocation has to increase around 10% per year to satisfy internal demands. Capacity building is a critical variable at sub-national level. The expected budget allocation is around $105.000 million by 2015 (PRSP II projections).

In terms of budget (external resources), we found that the level of support should increase at least at the level of 5% per year and Decentralised Aid Support (DAS) could improve the local capacity and address the local demands and needs. The UNCDF Local Development Fund (LDF) and UNDP local investment in capacity building are critical examples in Mozambique. UNDP/UNCDF evidence shows that key lessons were generated from experiences with working at both the upstream and downstream levels, aiming to effectively contribute to achieve the MDGs.

The foremost conclusion is that investment in Local Development is a critical feature to achieve MDGs and decentralization could be vehicle for that purpose. Good Governance in one critical pre-condition.



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