Country Report Mozambique June 2008

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 10.5% in 2008 and 9.7% 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

• More than 26,000 Mozambicans have been forced to flee South Africa following an outbreak of violence against foreign workers.
• The government has announced that municipal elections will be held on November 9th in 43 municipalities, ten more than in 2003.
• The government and Mozambique’s main donors have completed the 2008 joint performance review. Donors have commended the government’s overall performance and have pledged US$774m in aid for 2009.
• Donors have reported strong improvements in public financial management, with above-target revenue collection, reduced tax evasion, improved auditing and progress on simplifying fiscal procedures.
• Donors have expressed deep concern at the government’s lack of progress in tackling corruption and governance issues.
• According to the central bank, real GDP grew by 7.3% in 2007, despite the impact of cyclone damage and the rising cost of energy imports.
• The government has launched a programme aimed at boosting the output of wheat in Mozambique, with the aim of domestically producing half of the national wheat requirement by 2014-15.
• The government has announced plans to sell shares in two state enterprises, the oil company, Companhia Mocambicana de Hidrocarbonetos (CMH), and the mobile-phone operator, M-Cel, on Maputo’s stock exchange.