VZCZCXRO8828
RR RUEHDU RUEHJO RUEHMR
DE RUEHTO #0661/01 1570647
ZNR UUUUU ZZH
R 060647Z JUN 06
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 5489
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLMC/MILLENNIUM CHALLENGE CORP  0050
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MAPUTO 000661 
 
SIPDIS 
 
SIPDIS 
 
AF/S FOR HTREGER AND JMALONEY 
JOHANNESBURG FSC FOR RDONOVAN 
JOHANNESBURG TDA FOR DSHUSTER 
USDOC FOR RTELCHIN 
MCC FOR SGAULL 
USAID FOR AA/AFR AND AFR/SA 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: MOZAMBIQUE: MAY ECONOMIC DIGEST 
 
 
MAPUTO 00000661  001.2 OF 002 
 
 
¶1. This is a brief summary of significant economic 
developments in Mozambique during May 2006.  We provide it 
as a supplement to our other reporting.  The items discussed 
are: 
 
-- Mozambique Misses First Quarter Revenue Targets 
-- Donors Pledge USD 595 Million for 2007 State Budget 
-- USAID Supports Mozambique's Tourism Sector 
-- Indian Government Extends Line of Credit 
-- Rehabilitating Mozambican Airports 
-- Mozambique Leaf Tobacco Opens Processing Plant in Tete 
 
Mozambique Misses First Quarter Revenue Targets 
--------------------------------------------- -- 
 
¶2. On May 12 Mozambican Minister of Finance, Manuel Chang, 
announced that revenue collected by the Mozambican 
government in the first quarter of 2006 fell short of its 
target.  Chang stated that Q1 revenue amounted to 5,166.3 
billion meticais (approximately USD 194 million), only 94.6 
percent of the target for the quarter.  Of the total sum, 
4,580.8 billion meticais (approximately USD 172 million) was 
derived from tax revenue, which represents 98.5 percent of 
the first quarter target.  Despite the shortfall, Chang was 
optimistic that corrective measures could be taken to ensure 
the deficit would be made up later in the year. 
 
Donors Pledge USD 595 Million for 2007 State Budget 
--------------------------------------------- ------ 
 
¶3. On May 11 the 18 donors and international agencies, known 
collectively as the "Program Aid Partners" announced that 
they would grant USD 595 million in direct support for 
Mozambique's 2007 State Budget.  This figure amounts to a 
real increase of USD 44 million over contributions made for 
the 2006 budget.  The African Development Bank joined the 
donor group this year, pledging USD 90 million in direct 
budgetary support -- USD 60 million for this year and USD 30 
million for 2007. 
 
¶4. Of the total funds, USD 372 million will go directly to 
the State Budget and has not been assigned to any project or 
sector.  The remaining funds are targeted at specific 
sectors, as follows -- USD 56 million for education, USD 38 
million for agricultural development, USD 89 million for 
health, USD 36 million for roads, and USD 5 million for 
water supply.  According to Mozambique's Minister of 
Finance, Manuel Chang, 48 percent of the current State 
Budget comes from direct foreign aid. 
 
USAID Supports Mozambique's Tourism Sector 
------------------------------------------ 
 
¶5. The US Agency for International Development (USAID) has 
granted Mozambique USD 5.5 million for the development of 
tourism in the northern Mozambican provinces of Nampula, 
Cabo Delgado and Niassa.  The three-year project was 
launched in Pemba, the Cabo Delgado provincial capital, by 
Tourism Minister Fernando Sumbana and USAID Director Jay 
Knott.  The program seeks to use tourism as a tool for 
environmental preservation and for overall economic 
development in Mozambique, as well as to support the GRM's 
vision of making Mozambique "the most vibrant tourist 
destination in Africa."  The project is expected to attract 
private sector investment, while also contributing to 
professional training and improvement of tourism sector 
policies.  (Note: According to figures released on May 12 by 
the Mozambican Tourism Promotion Board, the Mozambican 
tourism sector is expected to net more than USD 120 million 
in 2006.  Revenue for 2005 reached approximately USD 100 
million, accounting for 2.4 percent of the country's gross 
domestic product.) 
 
Indian Government Offers Line of Credit 
--------------------------------------- 
 
¶6. On May 22 the Indian government pledged to open a line of 
credit, in the near future, worth USD 35 million.  The 
announcement was made by the outgoing Indian High 
Commissioner to Mozambique, Upendra Baro, during his 
farewell meeting with President Guebuza.  A Mozambican 
delegation is to visit India to discuss the mechanisms for 
 
MAPUTO 00000661  002.2 OF 002 
 
 
an agreement.  Baro said that during his two and a half year 
tenure in Mozambique the Indian and Mozambican governments 
had cooperated closely on the transportation issues, with 
India disbursing USD 20 million to the railway sector. 
 
Rehabilitating Mozambican Airports 
---------------------------------- 
 
¶7. The President of Mozambican Airport Company (ADM), 
Dionisio Cambaza, has announced plans to invest USD 21 
million over the next three years on the refurbishing and 
modernization of the airports in Beira, Quelimane and Tete. 
The rehabilitation project will be financed by the 
Mozambican government and Danish cooperation (DANIDA), 
according to Cambaza.  The project includes repaving runways 
and installing luminous signaling systems at the airports in 
Beira and Quelimane, as well as the installation of an 
airborne instrument landing system (ILS), firefighting 
vehicles, generators, and communication and safety 
equipment. 
 
¶8. Cambaza also stated that ADM had recently selected seven 
bids for the refurbishment and extension of Maputo 
International Airport.  Though the names of the bidders have 
not been made public, Cambaza told the Embassy Commercial 
Specialist during a May 24 meeting that bids had come from 
Chinese, Portuguese, Brazilian and French companies.  The 
final selection is expected in late September or early 
October, with construction targeted to begin in January 
¶2007.  The Maputo airport project will include modernization 
of the airport, construction of a VIP pavilion, a new 
control tower, repair and extension of the cargo terminal, 
as well as refurbishing of access roads. 
 
Mozambique Leaf Tobacco Opens Processing Plant in Tete; 
Alliance One Announced Its Exit 
--------------------------------------------- ---------- 
 
¶9. On May 7 Mozambican President Armando Guebuza inaugurated 
the country's first tobacco processing plant, located in 
Mozambique's Tete province.  The plant, built by Mozambique 
Leaf Tobacco, a subsidiary of the US-based Universal Leaf 
Africa Company, hopes to process and export 24,000 tons of 
tobacco this year (estimated export value of USD 50 
million).  Its installed capacity is 50,000 tons of tobacco 
yearly.  The unit was built at an estimated cost of USD 55 
million. 
 
¶10. At the same time, another US company and the other 
dominant player in the tobacco industry here, Alliance One, 
announced it was pulling out of Mozambique as a result of 
losing its buying concession in the tobacco-rich district of 
Chifunde, in Tete province.  Alliance One has filed a 
political risk insurance claim for the closing of its 
Mozambique operations. 
 
¶11. Note: Mozambique is second only to Malawi as Africa's 
largest Burley variety tobacco producer.  Tobacco, together 
with cotton and cashew nuts, is one of Mozambique's main 
agricultural export products and sources of foreign 
currency. 
 
LA LIME