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Republic of Mozambique: Poverty Reduction Strategy Paper Annual Progress Report

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Republic of Mozambique: Poverty Reduction Strategy Paper Annual Progress Report © 2005 International Monetary Fund August 2005 IMF Country Report No. 05/310 [Month, Day], 2001 August 2, 2001 January 29, 2001 [Month, Day], 2001 August 2, 2001 Republic of Mozambique: Poverty Reduction Strategy Paper Annual Progress Report Poverty Reduction Strategy Papers (PRSPs) are prepared by member countries in broad consultation with stakeholders and development partners, including the staffs of the World Bank and the IMF. Updated every three years with annual progress reports, they describe the country's macroeconomic, structural, and social policies in support of growth and poverty reduction, as well as associated external financing needs and major sources of financing. This country document for Mozambique, dated June 7, 2005, is being made available on the IMF website by agreement with the member country as a service to users of the IMF website. To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to [email protected]. Copies of this report are available to the public from International Monetary Fund • Publication Services 700 19th Street, N.W. • Washington, D.C. 20431 Telephone: (202) 623-7430 • Telefax: (202) 623-7201 E-mail: [email protected] • Internet: http://www.imf.org Price: $15.00 a copy International Monetary Fund Washington, D.C. (Translated from Portuguese) REPUBLIC OF MOZAMBIQUE REVIEW OF THE ECONOMIC AND SOCIAL PLAN OF 2004 7 JUNE 2005 - 2 - ECONOMIC AND SOCIAL PLAN EVALUATION 2004 ________________________________________________________________ CONTENTS I. INTRODUCTORY NOTE...............................................................................3 II. INTERNATIONAL OVERVIEW......................................................................4 III. NATIONAL SOCIAL AND DEMOGRAPHIC OVERVIEW/REVIEW ...........7 III.1. MILLENNIUM DEVELOPMENT GOALS (MDGs) .........................................7 IV. NATIONAL MACROECONOMIC OVERVIEW .........................................10 IV.1. GLOBAL AND SECTORAL PRODUCTION............................................11 A. AGRICULTURE, LIVESTOCK AND FORESTRY.................................12 B. FISHERIES...........................................................................................17 C. THE MINING INDUSTRY .....................................................................19 D. MANUFACTURING INDUSTRY...........................................................20 E. ELECTRICITY AND WATER................................................................21 F. CONSTRUCTION.................................................................................22 G. BUSINESS ...........................................................................................22 H. RESTAURANTS AND HOTELS ...........................................................23 I. TRANSPORT AND COMMUNICATIONS.............................................23 IV.2. MONETARY AND FOREIGN EXCHANGE SECTOR.............................24 IV.3. INFLATION .............................................................................................29 IV.4. BALANCE OF PAYMENTS.....................................................................32 V. PRINCIPAL DEVELOPMENTS BY SECTOR..............................................34 V.1. SOCIAL AREA .........................................................................................34 A. EDUCATION ........................................................................................34 B. SCIENCE AND TECHNOLOGY ...........................................................42 C. HEALTH ...............................................................................................42 E. WOMEN AND SOCIAL ACTION ..........................................................49 F. WAR VETERANS.................................................................................53 G. CULTURE.............................................................................................54 H. YOUTH AND SPORTS.........................................................................56 I. ENVIRONMENT ...................................................................................57 V.2 ECONOMIC AREA ...................................................................................59 A. AGRICULTURE....................................................................................59 B. INFRASTRUCTURE.............................................................................63 C. FISHERIES...........................................................................................68 D. MINERAL RESOURCES......................................................................69 E. MANUFACTURING INDUSTRY...........................................................71 F. TOURISM .............................................................................................72 G. TRANSPORT AND COMMUNICATIONS.............................................73 V.3. GOOD GOVERNANCE, LEGALITY, JUSTICE AND DECENTRALISATION ....................................................................................77 V.4. EXTERNAL RELATIONS AND DEFENCE ..............................................82 VI. BUDGETARY POLICY ..................................................................................89 ANNEX 1 – SIMPLIFIED MATRIX OF PRINCIPAL INDICATORS .....................95 - 3 - ECONOMIC AND SOCIAL PLAN EVALUATION 2004 ________________________________________________________________ I. INTRODUCTORY NOTE This evaluation was conducted during the final year of the Government's Five- Year Programme, 2000-2004. As recommended in the 2004 Economic and Social Plan document, this evaluation has been structured differently from previous evaluation reports in order to: (i) improve the consistency and coherence of the various planning instruments, and; (ii) monitor and evaluate the implementation of PARPA, an important instrument in the Government's strategy to reduce absolute poverty. The present document is divided into five main chapters: International Overview, National Social and Demographic Overview, National Macroeconomic Overview, Principal Developments by Sector and Budget Execution. This was a year in which public sector reforms were continued and consolidated. There was notable growth in social and economic infrastructure. There are signs that the Mozambican economy is continuing to grow at the planned rate, inflation is under control and the Metical appreciated strongly. The Government was able to honour its budget execution commitments, channelling more resources into sectors prioritised in the PARPA and keeping budget execution rates within the limits set in the budgetary legislation. - 4 - ECONOMIC AND SOCIAL PLAN EVALUATION 2004 ________________________________________________________________ II. INTERNATIONAL OVERVIEW With an estimated 5% growth rate (compared with 3.9% in 2003) the world economy expanded significantly in 2004. According to the International Monetary Fund (IMF) this rate is one of the highest that has been registered in the last 30 years. Growth is largely a result of the performance of the North American and Asian economies, particularly those of Japan and China. Latin America also showed signs of recovery while African economies performed relatively well. However, increases in the price of oil caused economic growth rates to slow from the third quarter of 2004, particularly in the USA, Japan and China. In mid-August a barrel of oil cost 44.7 USD while at the end of the year the price fluctuated between 45 and 50 USD per barrel. In the coming months, the greatest risks will continue to be linked to the behaviour of oil prices (even though inflation is relatively low and stable) and the pressure that the price of oil will exert on interest rates. Interest rates tended to rise in the second half of 2004, following the movements of the United States Reserve Bank. The fiscal deficits of advanced economies continued to be a problem in 2004. These economies as a whole presented a fiscal deficit of 3.4% of Gross Domestic Product in 2004. The United States of America The GDP of the USA is estimated to have grown at a rate of 4.4% in 2004, compared with 3% the previous year. During 2004, the Federal Reserve Bank increased interest rates (federal funds) five times in the second half of the year to 2.25% as a method of controlling inflation in the face of strong economic growth. In 2004, private consumption and investment, whether by residents or non- residents, was relatively strong, considering that interest rates were relatively low throughout the year. The external sector was strong, particularly in the area of imports. Industrial production, at 4.4%, was higher than the previous year. The unemployment level in December was 5.4% (compared with 5.7% in 2003). The Dollar depreciated throughout the year in relation to the most important currencies, particularly the Euro. The principal problem facing the North American economy continues to be the double deficit: fiscal and external. These debts, accompanied by changes in the price of energy, could affect the available income of families. This in turn could lead to almost non-existant levels of savings that would have implications on future consumption and the behaviour of the dollar in coming months. - 5 - ECONOMIC AND SOCIAL PLAN EVALUATION 2004 ________________________________________________________________ Japan Growth was estimated to be relatively high in Japan at 4% compared with 2.5% in 2003. This rate is the result of the continuation of high export rates
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