The Impact of the Informal Economy on Mozambique - Research Paper Example

The policy measures that the government uses in formalizing the informal enterprises are also highlighted. This is based on the government’s efforts to encourage informal firms to formalize their operations. The informal economy is characterized by unpredictable expansions especially when the economic growth is significantly low. It is also likely to shrink when the economic performance improves. The informal economy in Mozambique is comprised of about 7.7 million workers who are direct beneficiaries of the informal economy.

Mozambique is a country that has enjoyed substantial success after going through a conflict that devastated its economy. The country experienced a significant economic increase between the years 2000 and 2006 of about 8 percent. This success is attributed to the political stability and the macroeconomic stability that it has witnessed over years that it has under economic recovery. The strong economic development is mostly driven by foreign-funded projects that are also boosted by the significant flow of aid. The informal economy has not been left behind as it is considered part of the vibrant economic growth. The informal sector refers to the industrial sector that is not regulated by the government or the informal sector. It has made substantial contributions to the economy that has enabled the country to boost its economy. The informal economy is an essential solution in ending poverty because it employs a good number of people.

 Statistics reveal that the informal economy in Sub-Saharan Africa contributes about fifty percent of the whole economy. Most African country’s economies depend on the Agricultural sector, while the informal sector has increasingly contributed to their GDP. The business in the informal economy employs a significant number of workers who are not employed by the formal sector. The statistics further indicate that over 89% of workers in the informal sector are women. This is compared to only 54% of the workers who are males.