Mozambique News Agency

No.126, 26th January 1998


Paris Club caps debt relief at 80 per cent

The Paris Club, the grouping of major creditor nations, has agreed to write off 80 per cent of Mozambique's debt to club members - but groups such as Oxfam state that this is not enough to bring the country's debt down to sustainable levels.

The Club met on 21 January to discuss Mozambican debt, after all members received a strongly worded letter from President of the World Bank, James Wolfensohn, urging them to grant exceptionally generous terms.

Michel Camdessus, managing director of the IMF, wrote to the Finance Ministers of the seven most industrialised countries (G-7), complaining that the Paris Club members were proving less willing than the multilateral bodies to write off Mozambique's debts.

But the Club appears to have rebuffed Wolfensohn and Camdessus by insisting on the 80 per cent ceiling.

HIPC in danger of stillbirth

The London-based humanitarian organisation, Oxfam, which has been campaigning hard on debt relief, fears that a refusal by the Paris Club to go above 80 per cent is a serious blow to the HIPC (Highly Indebted Poor Countries) debt relief initiative.

The aim of the initiative is to reduce the debt burden of poor countries to sustainable levels. The World Bank and IMF define "sustainability" as a debt service ratio in the range of 20-25 per cent and a debt-stock-to-exports ratio in the range of 200-250 per cent.

According to IMF/World Bank figures, Mozambique's debt service ratio would average 30 per cent between 1996-2005, with a peak of 37 per cent in the year 2000. As for the debt-stock-to-exports ratio, even the most optimistic figures put this at over 400 per cent.

In September, the Bank and the IMF announced that, in principle, Mozambique was eligible for HIPC treatment. They believed they had all the creditors on board, in a debt relief share-out that would bring the debt down to "sustainable" levels.

Paris Club leaves HIPC $350 million short

Sustainability in the Mozambican case meant a debt service ratio of slightly less than 20 per cent (although NGOs such as Oxfam argued that it should be considerably less) and a debt-stock-to-exports ratio of around 200 per cent.

To achieve this Mozambique's main bilateral creditors, organised in the Paris Club, would have to go beyond an 80 per cent write off.

Certain Paris Club members are prepared to be generous: under the Labour Party government elected last year, Britain has advocated a 90 per cent write-off. This is opposed by several major creditor nations, notably Germany, Japan, Italy and the Club's newest member, Russia.

According to Oxfam, the difference between the IMF/World Bank "sustainability" estimate and the Paris Club's 80 per cent limit is $350 million.

Creditors rush to aid of South-East Asia

The contrast with western reaction to the financial crisis in South-East Asia is striking. The G-7 countries have mobilised over $100 billion to bail out the Asian economies: Oxfam estimates that only five billion dollars would be needed to implement HIPC in 20 African countries.

The most obstructionist line has been taken by Germany which opposes the IMF selling off some of its gold reserves to channel the proceeds into debt relief.

Extra aid promised

The Paris Club cloud has an intriguing silver lining. The Paris Club is also to grant Mozambique additional bilateral aid of $170 million. It is not clear whether this is a way of writing off more debt without saying so, or whether this is concessional aid that has nothing to do with the debt question. But even if it is disguised debt relief, it would still leave Mozambique at least $180 million short of optimal HIPC terms.

HIPC does not take effect immediately. Although Mozambique wants the "completion point" - the moment at which the debt relief comes into force - to occur by mid-1998, the World Bank is insisting on mid-1999.

Wrangling between creditors over who pays what share of the debt relief package could postpone the completion point still further. Even under the most optimistic scenario it seems that Mozambique will have to endure at least 18 months more of rigid adherence to IMF and World Bank structural adjustment policies, before it can collect its HIPC reward.

Renamo call to annul voter registration

The Mozambican government has expressed surprise at the demand made on 22 January by Renamo that the November-December voter registration should be cancelled, allegedly because it was fraudulent, and new registration arranged.

The Minister of State Administration, Alfredo Gamito, told reporters that the government was particularly surprised because even before the final results of the registration have been announced, Renamo is contesting them.

"Besides that, I must say that we, the government, have not received any official complaint, in writing, denouncing any kind of fraud in the process of updating the electoral registers", said Gamito.

He noted that the process ended more than a month ago, and only now is Renamo publicly challenging it, including "the results", even though they have not yet been made public.

As for whether the entire process should be repeated, Gamito said that the government has not discussed this. Any decision would have to be taken by the National Elections Commission (CNE), the independent body in charge of organising elections.

For its part, the CNE has not found any technical reason that would justify re-running the voter registration. CNE spokesman Carlos Manuel acknowledged that some irregularities were detected during registration, but he said that they were corrected at local level so that most of them now belong to the past.

He also noted that neither Renamo, nor any other registered political party ever officially notified the CNE or the Electoral Administration Technical Secretariat (STAE - the electoral branch of the civil service) of any irregularities in the registration.

Carlos Manuel revealed that his institution has met with Renamo leader Afonso Dhlakama. In that meeting, Dhlakama voiced certain concerns, shared by other sectors of the society, and which the CNE took seriously. Since then it has been seeking solutions for these concerns, said Manuel.

STAE director Armenio Correia described Renamo's attitude as one aimed at discrediting his institution and, consequently, the entire process of preparing the municipal elections scheduled for 29 May.

Independent candidate planned for Maputo

A group of prominent Maputo citizens is planning to run an independent candidate for the post of mayor of the city in the local elections scheduled for 29 May.

The group met on 22 January, and its likely candidate is a young doctor, Filipe Gagnaux. He is the son of Rene Gagnaux, a much loved Swiss doctor who worked in Mozambique for quarter of a century and was murdered by the apartheid-backed Renamo rebels in May 1990.

Other members of the group include the former chairman of the Mozambican Commercial Association, Mario Ussene, and two former members of the government - former deputy agriculture minister Paulo Zucula, and former secretary of state for technical education, Maria dos Anjos Rosario.

Gagnaux told the meeting that if elected he would do all in his power to ensure honest and transparent management of the city.

The main problem facing the group is arranging the number of signatures from registered voters needed to present a candidature. The local election law states that candidates for mayor must be backed with the signatures of at least one per cent of the electorate - in the case of Maputo, that is about 5,000 people. The closing date for candidates is 15 March.

The group has an institutional backer, in the shape of the breakaway trade union group CONSILMO (Confederation of Free and Independent Unions of Mozambique). Its general secretary, Jeremias Timane, told the meeting that CONSILMO members in Maputo would be mobilised to provide the necessary signatures - but on the understanding that, if elected, Gagnaux would defend workers' interests.

China invests $7.2 million in Mozambique

The Bank of Mozambique signed an agreement on 19 January with the Chinese Central Bank that authorises the latter to invest 60 million Yuan (about $7.2 million US dollars) in Mozambique.

"Most of this investment will be used in the building of military residences for Mozambican army officers in Maputo", the Chinese Ambassador, Shao Guan Fu, told reporters in Maputo.

Shao did not specify the areas to be covered with the remainder of the money, saying only that it will be used to support the Economic Recovery Programme (PRE), that started back in 1987, and is implemented under the watchful eyes of the World Bank and the IMF.

Shao explained that the agreement is the largest of three accords approved during the visit of Chinese Prime Minister Li Peng to Mozambique, in May 1997.

The other two agreements, which are already underway, concern the collection and processing of rubbish in Maputo city, and opening new wells in some Maputo suburbs.

Rains bring hope and death

Sixty three die in landslide

Sixty three people have died and 78 are missing following a landslide in Zambezia on 20 January.

The landslide was caused by heavy rains and strong winds in the area of Chizongue, in Milange district. According to the local authorities, 200 houses were destroyed, leaving about 7,500 people homeless, and more than 2,000 peasant fields were flooded.

The Coordinating Council of Mozambique's Relief Agency (DPCCN) said that the local government, in coordination with United Nations agencies and NGOs, have started emergency rescue actions and are endeavouring to rebuild the damaged infrastructures.

The Zambezia provincial director of Transport and Communications, Antonio Oliveira, said that an intersectoral brigade, including teams from the health and education services, DPCCN, Agriculture and Fisheries, and deputies of the Assembly of the Republic, the Mozambican parliament, visited Chizongue on 22 January to assess the scale of the damage and the needs of the victims.

Aid that includes blankets, clothes, seeds, various household utilities and medicines was sent to the disaster site on 21 January.

Rains cause havoc

The rains in northern and central Mozambique have disrupted transport in several provinces.

In Tete roads between the provincial capital and the districts of Mutarara, Zumbo, Maravia and Magoe have been interrupted due to the rains.

In Sofala there are reports that the road between the localities of Tica and Buzi has also been blocked.

In Nampula the provincial authorities are still struggling to reinstate communications between the provincial capital and six districts, that were cut off from the rest of the province after heavy rains.

The storms demolished 993 houses in the suburbs of Nampula city, and 224 homes in the port of Nacala.

Responsible for much of the damage was a cyclone that has now moved away from Mozambique, and on 22 January was located near Madagascar, moving in a south-easterly direction.

Fears of "El Nino" give way to cautious optimism

The recent heavy rains in much of southern Africa have reduced fears that the region will experience a full scale drought this crop year, but the UN World Food Programme (WFP) says it is remaining on the alert.

Fears of drought arose from the "El Nino" phenomenon, an anomalous warming of the surface waters of the southern Pacific which disrupts world-wide weather patterns. Over the last few decades, "El Nino" episodes correlate strongly with drought in southern Africa.

The latest WFP update, received by AIM on 15 January, states that meteorologists still regard the current "El Nino" as a very strong warm episode expected to wane only three to six months from now. But the WFP adds that "its expected effects on southern Africa - severe and widespread drought - have not materialised, and recent rains in the region, unusual for El Nino seasons, have created a cautious optimism."

The WFP update cites unofficial estimates that, even were it to stop raining in mid-January, the result would not be an agricultural disaster.

The worst-case scenario involves a 30 per cent reduction in yields at the most, and the WFP says that would require "only a small-scale emergency operation".

Inflation drops to less than six per cent

The Bank of Mozambique announced on 15 January that Mozambique's rate of inflation in 1997 was just 5.8 per cent, compared with the 14 per cent target set by the government, and with the 16.6 per cent inflation of 1996.

A report on monetary and exchange rate policy given to the annual meeting of the Bank's Consultative Council said that inflation from January to September was only 2.3 per cent - which compares with inflation rates over the same period of 3.5 per cent in Malawi, 4.6 per cent in South Africa, 6.8 per cent in Botswana, 9.5 per cent in Tanzania, and 10.5 per cent in Zambia.

Price rises in the last quarter of 1997 pushed the final figure up to 5.8 per cent. The Bank report blamed this on the usual Xmas price hikes, on increases in electricity and telecommunications tariffs, and on the poor state of some important access roads which hindered trade between and within provinces.

A problem with the way that inflation is calculated is that it relies on the Maputo consumer price index: prices in some other parts of the country may well be higher.

One of the factors contributing to low inflation is the stability of the Mozambican currency, the metical. The Bank says that in 1997 the metical devalued by only 1.45 per cent against the US dollar, compared with a five per cent devaluation in 1996.

The difference between the legal and the black market exchange rates was only 0.9 per cent, compared with 3.9 per cent in 1996.

This makes the metical one of the most stable currencies in the region. Between January and September the Zimbabwean dollar devalued by 17 per cent, the Mauritian rupee by 17.8 per cent, the Malawian kwacha by 12.4 per cent, the Zambian kwacha by 4.1 per cent, and the Tanzanian shilling by 3.3 per cent. The South African rand appreciated by 0.5 per cent, thus compensating slightly for its sharp decline the previous year.

Growth in sugar production expected

Mozambican sugar mills expect to produce over 40,000 tonnes of refined sugar in 1998, according to the economic advisor at the National Sugar Institute (INA), Tiago Wandschneider. This represents a growth of around 60 per cent over 1997

Last year, the only two mills functioning in the country produced 25,228 tonnes, a decline of 16 per cent on the figure for 1996, when 29,288 tonnes were produced.

Wandschneider said the 1997 decline was due to the February-March flooding of the Pungue valley, which seriously affected the Mafambisse Sugar Company. At least 1,100 hectares of the Mafambisse sugar cane plantations were destroyed in the flooding.

Wandschneider was optimistic about the 1998 prospects. The Mafambisse refinery has been rehabilitated and, "provided the weather is favourable, we expect a growth in sugar cane production".

The forecast is that Mafambisse will produce over 31,000 tonnes of refined sugar this year - almost double the 16,937 tonnes produced in 1997.

The only other mill that is currently operational is at Xinavane in Maputo province. In 1997 it produced 8,292 tonnes.

In theory, the Mozambican market ought to absorb all the Mafambisse and Xinavane sugar. Current demand for sugar in Mozambique is estimated at between 100,000 and 120,000 tonnes a year.

The government intends to move against the dumping of cheap sugar in Mozambique, which undercuts Mozambican producers. In December the government fixed a "reference price" for sugar of $385 a tonne. Any sugar imported at a cheaper price must pay a surtax that brings the final price up to $385 a tonne.

This measure protects the Mozambican companies against unfair competition, and it should also help attract foreign investors to the sugar sector.

Several potential investors, including the Kuwait Fund, the OPEC Fund, the Arab Bank for Economic Development in Africa, and the South African sugar company Tongaat Hullets, have expressed an interest in rehabilitating Mozambican sugar mills - but only if the Mozambican government applies a pricing policy that defends the national product.

Mozambican sugar production reached its peak in 1972, three years before independence, when the six mills functioning then produced 325,000 tonnes. The sugar sector then employed over 45,000 people, a figure which has now slumped to around 13,000.

Cotton harvest up 40 per cent

The Mozambican Cotton Institute (IAM) announced on 22 January that it believes final production from the 1997 cotton harvest will be about 40 per cent higher than planned.

The target for 1997 was 53,000 tonnes of raw cotton. But by 14 January, 73,362 tonnes had been marketed. Of this amount, 15,635 tonnes came from the commercial farming sector, but the bulk - 56,727 tonnes - was produced by peasant farmers.

There is still cotton in the hands of farmers awaiting collection. By March, when marketing ends, the total amount sold is expected to rise to about 74,000 tonnes.

The total area planted with cotton in the 1996-97 crop year was 153,692 hectares. Average yields were 470 kilos of cotton per hectare. Most of the cotton produced (62,911 tonnes) comes from the three northern provinces of Niassa, Cabo Delgado and Nampula. The central region (Zambezia, Sofala, Tete and Manica provinces) produced 6,595 tonnes. The semi-arid south (Maputo, Gaza and Inhambane provinces) only produced 2,865 tonnes.

The Mozambican textile industry has purchased 1,881 tonnes of cotton fibre, while 10,886 tonnes of fibre, valued at $16.1 million, has been exported. But the IAM notes a significant fall in the world market price of cotton. In June 1997, the price for cotton fibre was $1,600 a tonne. Today it is $1,400 a tonne.

IAM warns that "short and medium term price forecasts are not good, particularly because of the crisis affecting Asian economies".

Fuel prices fall following decree

The price of petrol and diesel fell on 14 January, as a result of the latest price adjustments for refined fuels decreed by the Ministry of Mineral Resources and Energy.

Petrol will now cost 6,700 rather than 7,000 meticais a litre, a fall of 4.3 per cent. The price of diesel falls by 1.1 per cent, from 5,240 to 5,180 meticais a litre, while cooking gas is now 3.3 per cent cheaper, costing 6,540.82 meticais per kilo rather than 6,764.94.

But jet fuel and kerosene become more expensive. Kerosene goes up by 8.6 per cent, from 2,920 to 3,170 meticais a litre. Jet fuel now costs 3,620.8 rather than 3,355.9 meticais a litre, a rise of 7.9 per cent.

Mozambique News Agency
Fenner Brockway House
37/39 Great Guildford Street
London SE1 0ES

Tel: 0171 928 5657,
Fax 0171 928 5954

Return to index