World Bank Document

International Bank for Reconstruction and Development FOR OFFICIALUSE ONLY CG 96-32 FROM: Vice President and Secretary Public Disclosure Authorized June 13, 1996 CONSULTATIVE GROUP FOR MOZAMBIQUE Paris, April 17-18,1996 CHAIRMAN'S REPORT OF PROCEEDINGS Attached is the Chairman's Report of Proceedings of the Meeting of the Consultative Group for Mozambique held in Paris, April 17-18, 1996. Distribution For Information Public Disclosure Authorized Executive Directors for: Australia Germany Russia European Office Austria Ireland Spain Tokyo Office Belgium Italy Sweden Resident Representative, Mozambique Brazil Japan Switzerland Canada Mozambique United Kingdom Denmark The Netherlands United States Finland Norway France Portugal African Development Bank Public Disclosure Authorized Arab Bank for Economic Development in Africa European Union European Investment Bank Food and Agriculture Organization International Finance Corporation International Fund for Agricultural Development International Monetary Fund Kuwait Fund for Arab Economic Development Nordic Development Bank Organization for Economic Cooperation and Development United Nations Children's Fund United Nations Development Programme Public Disclosure Authorized United Nations High Commissioner for Refugees World Food Programme World Health Organization This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 1ITTU~~r TABLE OF CONTENTS Page No. Chairman's Report .............................................................................. Annex I Agenda ................................... 9 ArnnexII List of Participants.................................... 0 Annex III Chair's OpeningStatement ................................ 22 Ms. KatherineMarshall, AFI Director,World Bank Annex IV Statementby the MozambicanDelegation ........ 27 HE Pascoal Mocumbi,Prime Minister Annex V Statementby the IMF ................................... 35 Annex VI UNDP Statement ....................... ............ 39 Mr. SolomonAkpata, UNDP Representative Annex VII Steps TowardsEconomic and Social Development 46 Statementby HE Tomaz Salomao Ministerof Financeand Planning AnnexVIII Statementon FinancingRequirements 55 HE Adriano Maleiane,Governor, Bank of Mozambique Annex IX Statementon FinancingRequirements 63 Ms. Rocio Castro,Economist, World Bank Annex X Chair's Closing Statement .66 Annex XI Press Release .72 11 1 __ CONSULTATIVE GROUP FOR MOZAMBIQUE Paris, April 17-18, 1996 Chairman's Report of Proceedings Backgouund 1. The ConsultativeGroup for Mozambique(CG) held its ninth meetingat the World Bank's EuropeanOffice in Paris on April 17 and 18, 1996. The meetingwas Chairedby KatherineMarshall, Director of the SouthernAfrica Department of the World Bank. The WorldBank's AlternateExecutive Director for the group of countriesthat includesMozambique also attended. The Mozambicandelegation was led by HE the Prime MinisterPascoal Mocumbi, and includedHE Tomaz Salomao,Minister of Planningand Finance, HE OldemiroBaloi, Ministerof Commerce,Industry and Tourism, HE AlfredoGamito, Minister of State Administration,HE Paulo Muxanga,Minister of Transportand Communications,HE Luisa Diogo, Vice-Ministerof Planningand Finance,and HE AdrianoMaleiane, Governor of the Bank of Mozambique. The Mozambiquedelegation also includedsenior Governmentofficials. The meeting was attendedby delegationsfrom Australia,Austria, Brazil, Canada,Denmark, Finland, France,Germany, Ireland, Italy, Japan,the Netherlands,Norway, Portugal, Spain, Sweden,the United Kingdomand the United States. Also representedwere the African DeveiopmentBank, the Arab Bank for EconomicDevelopment in Africa, the European Comnmission,the EuropeanInvestment Bank, the Food and AgricultureOrganization, the InternationalFinance Corporation, the InternationalMonetary Fund, the KuwaitFund for Arab EconomicDevelopment, the Organizationfor EconomicCooperation and Development,the UnitedNations Children's Fund, the United Nations Development Programme,the World Food Programmeand the WorldHealth Organization. Representativesfrom Russia attendedas observers. 2. The followingdocuments were distributedfor the meeting: MozambiqueGovernment: * "Steps TowardsEconomic and SocialDevelopment" The WorldBank: * "MozambiqueCountry Assistance Strategy" OpeningStatement by the Chair 3. In her openingstatement (Annex II), Ms. Marshallhighlighted Mozambique's achievementstowards sustainabledevelopment since the last CG meeting. She noted that the two previous CG meetingshad been held at criticaltimes for Mozambique. In 2 December 1993 the central challenge had been to complete the peace process, while in March 1995 the first democratic elections had just taken place and the goals for the future were being mapped out. In 1996, peace is well established and democracy is putting down roots, and the CG meeting is a timely opportunity to take stock of progress along the road to laying the foundation for a successful future for Mozambique. In particular, the CG as a group could focus more directly on the urgent task of improving the welfare of Mozambique's poor. 4. Ms. Marshall noted that in 1995 the group had traced an ambitious agenda for Mozambique, and that the Government had gone a long way towards meeting the goals that had been set. There is evidence that the living standards of the poor are improving, particularly in rural areas. Millions of farmers have resettled in the countryside and are growing food for their families, and the Government's efforts to support this process by promoting the development of markets, notably with the cashew marketing reform of 1996, have contributed to an increase in production and to improved incomes for farmers. Peace and democracy are being consolidated: a National Assembly meets regularly and consults with civil society and with opposition parties; the process of preparing for local elections, and for decentralization, is under way; the reform of the judicial system and the police is also in process; and there has been a real increase in spending in the social sectors, even in the face of a decline in overall public spending. In addition, inflation has been reduced, albeit to a level well short of the target; fiscal imbalances have declined considerably; and the enivironmentfor the private sector has greatly improved resulting in a real growth in output. 5. Turning to the future, Ms. Marshall noted that the agenda in Mozambique has shifted from the challenging one of securing the peace to the equally challenging one of generating growth. She suggested three areas for priority attention. The first is the urgent imperative to reduce inflation. Inflation affects poor people directly by eroding their purchasing power, and has a negative impact on investment and growth. Second, there are several key sectors with important potential for generating poverty-reducing growth. The first of these is agriculture, and it is central to the Government's strategy for both growth and poverty reduction. In addition to agriculture, Ms. Marshall noted that transport is kev to Mozambique's growth, given the country's important international transit corridors. A special side session would be held during the CG meeting on this subject. Third, improving the efficiency of public investment is an essential goal for the Government. 6. To conclude, Ms. Marshall noted that the challenges facing Mozambique in this post-war era are tremendous. She emphasized that Mozambique will need to orchestrate important structural changes and accelerate the rhythm of reforms, and will continue to count on the combined support of its ensemble of partners. 3 Statement by th- Mozambique Delegation 7. In his opening statement (Annex IV) the Prime Minister, HE Pascoal Mocumbi welcomed the representatives of the donor community and thanked them for their continued support. He declared that peace prevails in Mozambique, that the Government is making every effort to consolidate and strengthen the democratic process, and that the conditions for the country's economic and social development are being put into place. 8. On the issue of consolidating democracy, the Prime Minister highlighted the growing importance of the Assembly of the Republic; the rising activities of political parties within the Assembly; the participation of civil society in the political process; and the particular attention the Government has paid to eradicating corruption. He also noted the Government's progress towards decentralization and towards holding local elections. On the economic front, the Prime Minister reported that the Government was giving particular prioiity to the agricultural sector, particularly smallholder farmers. He went on to note the encouraging improvements he saw during his recent visit to a number of provinces, suggesting that the private sector is reacting flexibly to the reforms. 9. The PrinmeMinster concluded by stating that the Government's priorities in 1996 will continue to be those defined in 1995, namely, to continue with the economic reform program; to strengthen governance; to assist agriculture, especially smallholder farmers; and to improve health and education services, especially in rural areas. He encouraged the international community to maintain its support for the consolidation of democracy and the creation of conditions needed for Mozambique's economic and social development. Statement by the IMF 10. Mr. Leite of the IMF (Annex V)

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