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11 March 2002
HIV/AIDS Could Trigger Economic Downfall
by George Atkinson

The economic decline caused by the HIV/AIDS epidemic in one of Africa's hardest hit sub-Saharan countries, Mozambique, may translate into even more dramatic losses as the disease takes a toll on education, according to a World Bank report by a Purdue University agricultural economist.

Keeping children in school and maintaining educational quality, however, could temper the country's long-term negative economic prospects, Channing Arndt reports in a soon-to-be published World Bank document. This is the first macroeconomic study to focus on the impact of the illness on education and the subsequent long-run economic effects.

Arndt's analysis shows that the worldwide HIV/AIDS epidemic is leading to a far-reaching human development catastrophe in Mozambique, as it is in other disease-stricken countries in the region, such as South Africa. He writes that long-term economic outcomes in Mozambique could be changed depending on how education is handled.

Experts project that in Mozambique AIDS will kill large numbers of teachers and school administrators, with potentially heavy impacts on school enrollments. This will worsen already severe constraints on providing education, Arndt said. Also, large numbers of students are likely to quit school in order to work and/or take care of sick relatives.

"You have to look at how the disease will impact the whole economy," Arndt said. "Depending on the region of Mozambique, 6 percent to 20 percent of the adult population is HIV positive."

At the low end of the estimate of adults living with HIV, this means nearly 1 million people are afflicted. This is significant in a number of ways, Arndt said.

"It means more spending on health. People won't be saving for retirement," he said. "About 2 percent of laborers will die every year. What does this mean for economic growth, for the accumulation of capital, growth of the population, education?"

A yearlong interruption of the school system has a relatively minor effect on the population's education level, Arndt said. But because the time span between exposure and death from AIDS is estimated to be nearly a decade, disruptions of the system over this length of time could lead to a significant reduction in the education level of Mozambique's population. Indeed, UNAIDS and the World Health Organization (WHO) estimate that in 1999 alone, so many teachers in sub-Saharan Africa died in the epidemic that 860,000 children were deprived of an education.

In his paper, Arndt cautions that though "economics is about the welfare of people the science of economics is poorly prepared to appropriately measure welfare in the context of a pandemic that reduces life expectancy by 15 years in the space of about one decade." In Mozambique, life expectancy is now less than 40 years, according to UNAIDS and WHO.

In summarizing his report's findings, Arndt said that by 2010 Mozambique's economy will be between 16 percent and 23 percent smaller than it would be if not affected by AIDS, and the per capita Gross Domestic Product growth will be between 0.3 percent and 1 percent lower. The slowdown is due to reduced productivity growth, reduced population growth, reduced human capital accumulation and reduced physical capital accumulation.

Arndt makes three major policy recommendations based on his analysis:

  • Mozambique should take aggressive action to limit the scope, duration and economic impacts of the AIDS epidemic.

  • The nation should take steps to maintain school enrollment rates, graduation rates and quality of education.

  • Mozambique's economic planners should reduce their projections of a rapid population growth, as those forecasts are unlikely to be realized due to the epidemic.

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