VZCZCXRO2038
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0030/01 0081502
ZNR UUUUU ZZH
R 081502Z JAN 07 ZDK
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 6640
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLMC/MILLENNIUM CHALLENGE CORP  0143
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MAPUTO 000030 
 
SIPDIS 
 
SIPDIS 
 
AF/S FOR HTREGER AND JMALONEY 
JOHANNESBURG FSC FOR RDONOVAN 
JOHANNESBURG TDA FOR DSHUSTER 
USDOC FOR RTELCHIN 
MCC FOR SGAULL 
USAID FOR AFR/SA 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: December Economic Digest: Mozambique 
 
MAPUTO 00000030  001.4 OF 002 
 
 
¶1. This is a brief summary of significant economic 
developments in Mozambique during December 2006.  We provide 
it as a supplement to our other reporting.  The items 
discussed are: 
 
-- National Assembly Approves the 2007 Budget 
 
-- 2006 Inflation was 9.4 percent 
 
-- British Assistance Figures Announced 
 
-- EU and GRM sign new Fishing Accord 
 
-- IMF Approves Another PRGF Disbursement 
 
-- Most Sugar Exported in More than 30 Years 
 
 
 
National Assembly Approves the 2007 Budget 
------------------------------------------ 
 
¶2. On December 21 the National Assembly approved the 
national budget for 2007.  Total expenditure is expected to 
be 70.9 billion meticais (approximately USD 2.8 billion). 
Taxes will only bring in 32.5 billion meticais; the 
remainder will come from foreign aid.  According to Finance 
Minister Chang, who presented the budget to the National 
Assembly on December 13, 13.7 billion meticais will be 
provided by donor countries and financing agencies in direct 
support to the national budget and 24.7 billion will be 
given in project support. 
 
¶3. Most of the budget will be spent on the government's 
Action Plan for the Relief of Absolute Poverty (PARPA II). 
The education sector will receive 22 percent of the budget, 
the health service will receive 12.4 percent, and 
infrastructure will be provided 20.2 percent of the year's 
expenditures.  Only 2.3 percent will be spent on the 
Mozambican military, with another 5.6 percent apportioned to 
the security and public order sector.  Nearly three percent 
will be spent on debt servicing. 
 
 
2006 Inflation was 9.4 percent 
------------------------------ 
 
¶4. At a January 6 press conference, a senior official at the 
National Statistics Institute (INE) announced that inflation 
for 2006 was 9.4 percent.  This figure is several points 
higher than the government target of 7.5 percent, but the 
government is probably pleased that it can claim inflation 
still was only in the "single digits" realm.  According to 
the INE, inflation in 2005 stood at 11.2 percent and in 2004 
was 9.1 percent. 
 
 
British Assistance Figures Announced 
------------------------------------ 
 
¶5. Mozambican and British officials signed an assistance 
agreement in London on December 4, under which Britain 
commits itself to provide Mozambique with USD 410 million in 
budget support over the next five years and USD 90 million 
in project support to the education sector over the next 
decade.  The signing ceremony took place in the midst of 
President Guebuza's first official visit to the United 
Kingdom.  Speaking at the ceremony, Britain's Minister for 
International Development, Hilary Benn, praised Mozambique 
as one of the "great success stories of Africa."  In the 
2005/06 British financial year, British aid to Mozambique 
totaled approximately USD 100 million. 
 
 
EU and GRM sign new Fishing Accord 
---------------------------------- 
 
¶6. The Mozambican government and the EU signed a new fishing 
agreement in Brussels on December 21, valid for five years. 
The accord, which went into force on January 1, 2007, 
replaces an earlier agreement between both parties since 
¶2004.  Under the agreement, boats from the European Union 
 
MAPUTO 00000030  002.4 OF 002 
 
 
are entitled to catch 10,000 tons of tuna and related 
species per annum in Mozambican waters.  In exchange, the EU 
pledged to pay 900,000 Euros annually, which the Mozambican 
government is to use for the promotion of a sustainable 
marine environment. 
 
 
IMF Approves Another PRGF Disbursement 
-------------------------------------- 
 
¶7. In a press release issued December 20, the IMF announced 
that it had approved a further disbursement of concessional 
lending worth USD 2.4 million for Mozambique under the IMF's 
Poverty Reduction and Growth Facility (PRGF).  In July 2004 
the IMF approved the current PRGF, under which Mozambique is 
to receive a 11.36 million Special Drawing Rights (SDRs - 
approximately USD 17 million in today's dollars) divided 
into several disbursements through 2007, as long as it 
continued on a jointly agreed path of economic reform.  With 
this disbursement, the IMF has disbursed approximately 9.75 
million SDRs.  PRGF loans carry an annual interest rate of 
0.5 percent and are repayable over 10 years, with 5-year 
grace period on principal payments. 
 
 
Most Sugar Exported in More than 30 Years 
-------------------------------------------- 
 
¶8. According to data released by the Agriculture Promotion 
Center, Mozambique's four sugar companies exported 175,837 
tons of sugar, the most sugar exported from Mozambique since 
¶1973.  The sugar exports were valued at USD 67.3 million. 
According to the Center's director, Roberto Albino, this 
figure was 79 percent above the value of sugar exports in 
¶2005.  Albino attributed the increase to increased imports 
from the EU and the United States and higher world prices 
for sugar.  Some 140,000 tons of sugar were sold 
domestically in 2006.  In addition, some 10,000 tons of 
contraband sugar entered Mozambique from Zimbabwe and 
Malawi, according to Albino.  The four sugar companies 
together employed nearly 21,000 workers in 2006. 
 
Dudley