Country Report Mozambique

Outlook for 2008-09

• Frelimo is expected to remain in power under the president, Armando Guebuza, as Mozambique enters a lengthy pre-election period, which will culminate in legislative and presidential elections in December 2009.
• Although no changes to the donor-led economic programme are expected under Mr Guebuza, progress on reform could slow, given opposition within the cabinet and from Frelimo's hardliners to some of the proposed changes.
• Activity in mega-projects in energy and mining is expected to slow following the completion of several major projects.
• Real GDP growth is forecast to reach 7.3% in 2008 and 7.1% in 2009, driven by rising cash crop production and growth in commerce, communications and transport.
• Inflation is expected to rise to an average of 11.8% in 2008 and 9.3% in 2009, in response to rising food and energy prices and to government spending in the run-up to provincial, municipal and national elections in 2008-09.
• Frelimo is expected to remain in power under the president, Armando Guebuza, as Mozambique enters a lengthy pre-election period, which will culminate in legislative and presidential elections in December 2009.
• Although no changes to the donor-led economic programme are expected under Mr Guebuza, progress on reform could slow, given opposition within the cabinet and from Frelimo's hardliners to some of the proposed changes.
• Activity in mega-projects in energy and mining is expected to slow following the completion of several major projects.
• Real GDP growth is forecast to reach 7.3% in 2008 and 7.1% in 2009, driven by rising cash crop production and growth in commerce, communications and transport.
• Inflation is expected to rise to an average of 11.8% in 2008 and 9.3% in 2009, in response to rising food and energy prices and to government spending in the run-up to provincial, municipal and national elections in 2008-09.

Monthly review

• Mr Guebuza has replaced the senior leadership of the Mozambican defence establishment, dismissing the long-serving defence minister, Tobias Dai, the army chief-of-staff and the deputy chief-of-staff.
• Mr Dai has been replaced by Filipe Nhussi, a former director of the state railway company, Caminhos de Ferro de Mocambique.
• The IMF has carried out its second review of Mozambique's policy support instrument (PSI), noting the economy's resilience despite exogenous shocks, notably the rise in the cost of fuel imports and adverse weather conditions.
• The Fund reported above-target revenue performance in 2007, due to robust domestic tax collection, and encouraging progress with strengthening public financial management and broadening the tax base.
• The Fund has again urged the government to reform the regime of fiscal incentives granted to investors, which it believes have been too generous and resulted in many large-scale projects paying little tax.
• The company that operates the Cahora Bassa dam, Hidroelectrica de Cahora Bassa, has agreed to supply an additional 250 mw of power over a five-year period to South Africa's power utility, Eskom, to alleviate shortages.
• The state airline, Linhas Aereas de Mocambique, has announced a public investment programme worth US$150m over the next three years.
• A project has been announced to construct a 350,000-barrels/day oil refinery in Maputo province, at an estimated cost of US$8bn.
• Mr Guebuza has replaced the senior leadership of the Mozambican defence establishment, dismissing the long-serving defence minister, Tobias Dai, the army chief-of-staff and the deputy chief-of-staff.
• Mr Dai has been replaced by Filipe Nhussi, a former director of the state railway company, Caminhos de Ferro de Mocambique.
• The IMF has carried out its second review of Mozambique's policy support instrument (PSI), noting the economy's resilience despite exogenous shocks, notably the rise in the cost of fuel imports and adverse weather conditions.
• The Fund reported above-target revenue performance in 2007, due to robust domestic tax collection, and encouraging progress with strengthening public financial management and broadening the tax base.
• The Fund has again urged the government to reform the regime of fiscal incentives granted to investors, which it believes have been too generous and resulted in many large-scale projects paying little tax.
• The company that operates the Cahora Bassa dam, Hidroelectrica de Cahora Bassa, has agreed to supply an additional 250 mw of power over a five-year period to South Africa's power utility, Eskom, to alleviate shortages.
• The state airline, Linhas Aereas de Mocambique, has announced a public investment programme worth US$150m over the next three years.
• A project has been announced to construct a 350,000-barrels/day oil refinery in Maputo province, at an estimated cost of US$8bn.