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A year of hope.

Mozambique may still be one of the poorest nations on earth, but as Guy Arnold reports, peace has truly descended, and the rebuilding begun.

Mozambique is now going through a historic period of reconciliation and, if all goes well recovery, after the horrendous disruptions of thirty years of war. Assuming the peace holds, everything will depend on bolstering what at present is one of the poorest, most fragile economies in the world.

GDP stands at $965m, while per capita GNP at $80m is the lowest in the world. At the same time, international debts of $4,153m are more than four times the county's GDP. Inflation is running at 42% and unemployment (estimated at the beginning of 1995), stands between 60% and 70% of the total workforce.

Statistics like these are hardly encouraging, yet when someone comes to write the history books, 1995 may be rated Mozambique's best year for a considerable time.

On the political side, Mozambique held its first multi-party elections in October. An estimated 90% of the electorate voted. Frelimo, the ruling party, won comfortably with 129 seats to Renamo's 112, while the Democratic Union took the remaining nine. Joaquim Chissano won the Presidential elections at the same time with 53.3% of the vote, and although Afonso Dhlakama indulged in some brinkmanship tactics, in the end he accepted the election results.

He also moved the political headquarters of Renamo to Quelimane in the north, to be in the centre of the party's support strongholds.

The process of integrating the two armies has been painful but it has gone ahead; discharged soldiers have however been responsible for unrest, largely over questions of pay.

In June 1994 the IMF approved an additional loan under its Enhanced Structural Adjustment Facility (ESAF) of SDR29.4m (about $42m) to support the reform programme into 1995, following an earlier credit in 1990. In February 1995 the IMF demanded fresh structural change as the price of its continuing support; these included a reduction in defence spending including a 50% reduction of salaries and a 30% cut in purchases of military equipment.

Mozambique's recovery depends upon a continuing input of foreign aid, and, as always, this raises the spectre of a mounting debt that the country will be unable to service, let alone repay.

On March 15, 1995, the Paris Club pledged $780m in loans and grants to assist recovery, while additional help for the year was forthcoming in the form of $350m in debt relief.

One billion Budget deficit

At present debt servicing costs $500m a year. On May 17 the EU agreed another aid package of $65m to cover the rehabilitation of the Cabora Bassa Dam and the Beira Corridor which are both crucial to recovery. Britain, separately, offered military training assistance, balance of payments support and some project aid.

The 1995 budget deficit is expected to be $1.1bn; equivalent to over half projected expenditure. The Government announced a Five-Year Plan to eradicate poverty and raise GDP by 8-9% by the year 2000.

The Plan prioritises rural development, education and health, followed by land reform and the provision of minimal prices for farmers.

In August the Technical Unit for the Reorganisation of Enterprise (UTRE), part of the Ministry of Planning and Finance, announced plans to privatise 20 state companies operating in the areas of food, agriculture, construction and tourism by the end of the year.

The Government had already raised $50m from the privatisation of another 20 companies over the period since 1992 and is now speeding up the process.

Another mark of Mozambique's recovery was the completion of the UN programme to repatriate refugees. On May 31, 1995, the programme of voluntary repatriation from Zimbabwe came to an end.

A total of 1.7m refugees, from six countries in Southern Africa, had returned home, while only another 39,000 refugees still remained to be repatriated from Malawi. These had all returned to Mozambique by the end of November.

On the one hand, this repatriation represents a significant plus for Mozambique, a sign of confidence that the war really has ended. On the other hand, there will be an additional 1.7m mouths to feed and an army of new job-seekers to accommodate.

When famine conditions returned to central and southern Mozambique in September 1995, following an already poor harvest, 1.5m people were affected.

One significant boost to Mozambique's fortunes has, however, come in the friendly attitude of South Africa. President Mandela made Mozambique his first foreign visit after the April 1994 elections in June of that year. Close trading ties have since developed, with South African businessmen looking at substantial opportunities for expansion.

Problems are still more evident than solutions however, and riots in Maputo last October were in response to rising food prices.

The admission of Mozambique to the Commonwealth as its 53rd member at the November Commonwealth meeting in New Zealand represents a hopeful advance for a country entirely surrounded by Anglophone members of the Association who have argued that its membership would promote regional stability. It also represents a move towards regional economic integration.

Mozambique is trying very hard to recover from the devastation of a long war and deserves all the help it can get. What it must not do is become so enmeshed in debt that real growth is stifled.
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Title Annotation:Mozambique
Author:Arnold, Guy
Publication:African Business
Date:Mar 1, 1996
Words:886
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