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AF/S FOR HTREGER AND JMALONEY
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USDOC FOR RTELCHIN
MCC FOR SGAULL
USAID FOR AA/AFR AND AFR/SA

E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique: April Economic Digest


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1. This is a brief summary of significant economic
developments in Mozambique during April 2006. We provide it
as a supplement to our other reporting. The items discussed
are:

-- IMF Completes 4th PGRF Review Mission

-- GRM and Donors Conclude Joint Review

-- Mozambique/South Africa Cooperation in Agriculture

-- KFW Grants 12 Million Euros for Tertiary Roads

-- Mozambique's National Social Security Institute to
Restructure

-- Maputo Concessionaire Adds New Shareholder


IMF Completes 4th PRGF Review Mission
--------------


2. In early April the IMF presented the result of its 4th
review mission under Mozambique's current Poverty Reduction
and Growth Facility (PRGF) arrangement. The IMF's overall
assessment was positive. The IMF considers Mozambique's
2005 economic performance generally good, the fiscal
outcomes better than previous years and is happy with
monetary policy benchmarks. One benchmark concern was with
decentralization - the IMF feels that a timetable with
future steps needs to be developed. Another was progress on
public sector reform, where the IMF concluded there must be
a move from strategy and planning to actual action. GDP
growth is predicted to be 7.9 percent in 2006 and thereafter
at 7 percent. The current PRGF arrangement expires in July

2007. The IMF currently anticipates that Mozambique will
graduate to another arrangement, the Policy Support
Instrument (PSI), upon expiration of the current PRGF. In
the region, Uganda already has a PSI and Tanzania is also
moving in that direction.

GRM and Donors Conclude Joint Review
--------------


3. On April 13 the GRM and the 18 donors who supply money
directly to the budget concluded a 45-day long joint review
of the government's performance in 2005, judging the
performance as positive, according to press reports. Budget

support donors so far have promised approximately USD 300
million in support for 2006. Outgoing chairperson of the
donor group, Swedish Ambassador Maj Inger Klingvall said
that as a result of the positive assessment, the donors
would be recommending continued budget support in 2007. But
she noted that donors were disappointed that the government
failed to reach a number of 45 jointly agreed targets,
particularly in the area of good governance. Here, eight of
13 targets were missed, including ones on public sector
reform and fighting corruption. Despite stressing "strong
political will" at the top, she claimed "implementing
machinery has not taken off."

Mozambique/South African Cooperation in Agriculture
-------------- --------------


4. On April 12, at a joint press conference in Maputo,
Mozambique and South Africa's Ministers of Agriculture
announced a new bilateral cooperation agreement in
agricultural training and research. According to
Mozambique's Agricultural Minister, Tomas Mandlate,
Mozambicans technicians will be sent to South Africa to
learn how to mechanize agriculture at low cost. Meanwhile a
pilot program on low cost mechanization is to be started in
Moamba district of Maputo province by the end of the month,
he added. Cooperation will also include work on electronic
registration of livestock.


KFW Grants 12 Million Euros for Tertiary Roads
-------------- --


5. KFW, the German development bank, granted 12 million
Euros for the building and maintenance of 277 kilometers of

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tertiary roads in the southern Mozambican province of
Inhambane. The Mozambique Road Fund will contribute an
additional USD 2.4 million. The undertaking, to build
tertiary road and create a system for ongoing maintenance,
is predicted to start this fall and take approximately 18
months.

Mozambique's National Social Security Institute to
Restructure
-------------- --------------


6. Armando Muiuane, Chairman of Mozambique's National
Social Security Institute (INSS), stated on April 6 that the
INSS intends to complete a full economic and financial
assessment of all of its assets. This assessment is part of
a restructuring already underway. Labor Minister Helena
Taipo appointed Muiuane as part of a shake-up of the
Institute last August, with his predecessor dismissed over
corruption allegations. Restructuring priorities include
modernization and use of computers, as well as collection of
outstanding debts owed by companies.

Maputo Concessionaire Adds New Shareholder
--------------


7. The South African shipping company, Grindrod, recently
joined as a shareholder in the Maputo Port Development
Company (MPDC). MPDC currently holds a 15-year concession
to operate the Port of Maputo. Grindrod purchased 12.24
percent of the consortium. A remaining 38.76% is held
additional foreign investors and 49% by Mozambique's rail
and port parastatal, CFM, and private Mozambique investors.

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