For more information, see Republic of Mozambique and the IMF

Republic of Mozambique—Enhanced Structural Adjustment Facility
Policy Framework Paper for April 1999–March 2002

Contents

Tables

Table 1. Mozambique: Summary and Time Frame for Implementation of
Macroeconomic and Structural Adjustment Policies, April 1999-March 2002

Sectors and Areas
of Action
Policy Objectives Strategies and Measures Timing of Measures

1.   Fiscal policy
1.1 Public Accounts Improve coverage and transparency of public accounts. Include in the budget previously off-budget expenditures that pass through the banking system. Throughout
1.2 Record in the budget all foreign aid flows passing through the banking system at the time of disbursement. Throughout
1.3 Progressively remove institutional and legal impediments to inclusion of off-budget revenue and expenditure flows in the budget. Throughout
1.4   Make public a quarterly disaggregated budget execution statement. Throughout
1.5 Draft new system of public accounting and approve the respective implementation schedule. Draft system by July 1999; approve schedule by September 1999
1.6   Formally close budget accounts (conta geral de estado) and submit to legal auditing and approval procedures. Annually, from December 1999 for previous year
1.7 Fiscal management Improve expenditure prioritization. Develop and approve (Economic Council) annually in June medium-term expenditure framework for all significant sectors as part of the annual budget preparation process; make public thereafter. Throughout
1.8 Improve government cash management. Prepare short-term forecasts of treasury cash flows and communicate to Bank of Mozambique. Throughout from July 1999
1.9 Revenue generation Rationalize tax system and broaden revenue base. Create recording system for exemptions on domestic taxes. September 1999
1.10   Examine options for the creation of a central revenue authority. March 2000
1.11   Complete computerization of at least 10 custom clearance points. September 1999
1.12   Review tax and tariff system and adopt position towards rationalizing exemptions regimes. March 2000
1.13 Strengthen tax and customs administration. Extend usage of unique taxpayer identification number from value-added tax (VAT) and domestic excises to personal and corporate income taxes and customs duties. March 2000
1.14   Strengthen auditing procedures, expand tax audit staff by ten additional auditors, and conduct at least two training courses. March 2000
1.15 Public enterprise
        and assets
        administration
Improve administration and mobilize revenue. Submit to the Council of Ministers a policy statement regarding public enterprises and companies with majority public ownership. March 2000
1.16   Prepare annual listing of the government's ownership interest in companies and dividends received. Throughout
1.17   Develop strategy on government shares in privatized enterprises, including formulation of criteria for divestment. June 2000
1.18   Develop plan to distribute shares held on behalf of labor. June 2000
1.19   Review performance contracts of all public enterprises and revise them as needed to ensure improved services delivery and to rationalize flow of funds with government. CFM and EDM, December 1999; others, December 2000
2.   Governance and public administration  
2.1 Achieve greater accountability within government. Implement the action plans (Administrative Tribunal and Inspectorate General of Finance) to strengthen the auditing function of the government. 1999-2001
2.2 Raise the effectiveness of public service. Complete evaluation of the impact of career streams and salaries reform on retention and recruitment in the civil service. December 2001
2.3   Prepare civil service regulations that include performance standards and incentive mechanisms. December 1999
2.4   Establish a code of administrative procedures in the civil service. December 2000
2.5   Formulate operational plan for Public Administration Training System (SIFAP). March 2000
2.6   Submit to Council of Ministers a strategic plan for public sector reform, including a functional review of ministries. June 2000
2.7 Ensure viability of social security system. Develop regulations governing private pension schemes. April 2000
2.8   Complete actuarial analyses of the pension scheme of the public sector and of the National Social Security Institute. December 1999
3.   Financial sector    
3.1 Financial market
      development
Raise central bank's capacity for indirect monetary management. Authorize the Bank of Mozambique to hold regular auctions of treasury bills, as needed for monetary control purposes. December 1999
3.2 Strengthen clearance system. Prepare payments system and infrastructure to switch to electronic check clearing. April 2000
3.3 Banking
      supervision
  Charge bank supervision with enforcing higher standards for the quality and timeliness of banks' statistical reports. September 1999
3.4   Raise the minimum standards for internal control of commercial banks. December 1999
3.5   Adopt new chart of accounts for commercial banks. December 1999
4.   External sector    
4.1 External debt Strengthen debt management. Strictly limit public sector foreign borrowing on nonconcessional terms. Throughout
4.2   Develop strategy for strengthening debt recording and management. June 2000
4.3 Trade policy Reduce level and dispersion of import tariffs. Lower the top import tariff rate to 25 percent. January 2002
4.4   Submit revised customs legislation to the National Assembly (basic customs act; Customs Code; and law on customs tribunals). December 1999
4.5 Complete an assessment of the remaining import surcharges. September 1999
5.   Private sector development    
5.1 Improve regulatory environment. Complete draft of new Commercial Code, covering company and contract law. August 2000
5.2   Submit to Parliament Commercial Code, Commercial Register, and Incorporation Act. July 2001
5.3   Publish annual report of Interministerial Commission for Removal of Administrative Barriers in order to strengthen accountability. From December 1999
5.4 Improve land-use rights. Finalize and adopt regulations for urban land use. December 1999
6.   Judicial reform    
6.1 Increase capacity and effectiveness of legal system. Adopt strategic plan for justice system. October 2000
6.2   Start effective operation of Center for Judicial Studies and Training. March 2000
6.3   Ensure dissemination of legal texts to legal professionals. From January 2000
7.   Poverty      
7.1 Raise focus on poverty in adopted policies. Establish systematic technical review process, reporting to the Council of Ministers, to consider the impact of major policy changes on poverty. March 2000
7.2 Improve targeting of expenditure programs. Commence implementation of poverty action plan (Linhas de Acção para a Erradicação da Pobreza) based on operational matrix. January 2000
7.3   Complete provincial poverty profiles. June 2000
8.   Health
8.1 Improve coverage and quality of health services. Implement and monitor Health Sector Recovery Program so as to increase provision of health service units per inhabitant. In particular, (i) raise DPT coverage of population to 80 percent; (ii) reduce index of geographic inequality in the provision of health care services to below 2.8; (iii) increase proportion of health posts/centers stocked with Essential Drugs Program kits to 90 percent; and (iv) increase the proportion of health posts/centers staffed with trained personnel to 90 percent. Throughout
8.2   Increase (annually) current expenditures both in real terms and as a share of total current expenditure in line with medium-term expenditure framework. 1999-2001
8.3   Develop and approve new Health Sector Strategic Plan. December 2000
8.4   Develop and adopt National Multisectoral Strategic Plan on HIV/AIDS. June 2000
9.   Education      
9.1 Improve quality of, and access to, primary and secondary education. Implement and monitor the Education Sector Strategic Program (ESSP). Attainment of its goals to be measured by improvement of 1-2 percentage points annually in (i) gross enrollment rate; (ii) proportion of students in primary and lower secondary schools passing key examinations; (iii) average repetition rate in primary and lower secondary schools (reduction). Throughout
9.2   Increase (annually) current expenditures on education both in real terms and as a share of total current expenditure in line with medium-term expenditure framework. Throughout
9.3 Increase number of skilled professionals. Develop strategy for tertiary education. December 2000
9.4   Prepare a strategy for technical and vocational education. December 2000
10.   Agriculture
10.1 Improve allocation and effectiveness of public expenditure. Implement the agriculture sector expenditure program (PROAGRI); maintain agricultural policy framework. Throughout
10.2 Remove impediments to development of input markets. Complete study on constraints hindering development of input markets (particularly seeds, fertilizers, and pesticides). December 1999
10.3 Improve security of land tenure. Identify outstanding valid land title applications in the pipeline and adopt indicative timetable for their reduction. January 2000
11.   Environment
11.1 Promote sustainable use of natural resources. Prepare and adopt additional regulations that apply to the environment law (including on waste management, environmental standards, marine pollution, CFC emission, and protected areas). December 2000
11.2   Establish environmental assessment review system across ministries and initiate related capacity-building action plan. June 2000
11.3   Develop integrated water sanitation and hygiene strategy. June 2001
12.   Transport and telecommunications
12.1 Improve sustainability and management of road network. Increase each year the government's share in financing of periodic and routine road maintenance expenditures, and ensure a smooth flow of maintenance financing. Throughout
12.2   Reclassify road network, including previously unclassified roads. December 2000
12.3   Separate state construction units and plant pools from road directorate and initiate privatization of the plant pools. October 1999
12.4 Remove barriers to competition in transport and telecommuni-cations. Adopt regulations for coastal shipping associated with the Maritime Law (Lei do Mar) to permit private sector entry. December 1999
12.5   Submit to National Assembly telecommunications legislation that would guarantee right of entry to private companies; complete implementing regulations. June 2000
13.   Energy and water
13.1 Improve access to electricity and water and reduce costs. Adopt regulations for implementation of electricity law that clears the way for private sector involvement in generation and distribution of electricity, and that establishes autonomous regulatory body. December 1999
13.2   Commence implementation of plan for demand-based water provision (Rural Water Transition Plan) in all provinces. March 2002
14.   Statistics      
14.1 Compilation
        of statistics
Improve quality, timeliness, and dissemination of statistics. Produce preliminary annual national accounts within 6 months of the end of the year. Produce final annual national accounts within 10 months of the end of the year. Throughout
14.2   Compile quarterly production indicators within 45 days of the end of the quarter. Throughout
14.3   Adopt statistics master plan stating timetable of priority data collection efforts (including redesign of INE's surveys), financing requirements, and responsible executing agencies/INE departments. December 1999
14.4   Adopt policy for public access to data and dissemination of statistical information. December 1999  

 

Table 2. Mozambique: Selected Economic and Financial Indicators, 1997-2001
  1997 1998 1999 2000 2001
  Prog. Prog. Proj. Proj. Proj.

  (Annual percentage change, unless
otherwise specified)
National income and prices
   Nominal GDP (in billions of meticais) 39,693 46,134 52,913 60,177 67,790
   Nominal GDP (in millions of U.S. dollars) 3,438 3,893 4,147 4,505 4,940
   Real GDP 11.3 12.0 9.7 7.0 7.2
   Real GDP per capita 8.9 9.5 7.3 4.6 4.9
   GDP deflator 11.1 3.8 4.5 6.3 5.1
   Consumer price index (annual average) 6.4 0.6 1.5 6.6 5.0
   Consumer price index (end of period) 5.8 -1.3 5.5 5.0 5.0
 
External sector
   Merchandise exports 1.7 7.9 18.6 9.4 57.8
   Merchandise imports -2.9 14.3 60.8 -20.5 -3.1
   Merchandise export volume 1.7 13.0 15.9 7.2 54.4
   Merchandise import volume 5.7 19.3 57.6 -22.3 -4.3
   Terms of trade 8.8 -0.3 0.3 -0.2 0.9
   Nominal effective exchange rate (end of period)1 6.5 -5.7 -2.4 ... ...
   Real effective exchange rate (end of period)1 9.4 -9.7 -6.9 ... ...
 
Government budget
   Total revenue 31.8 14.9 17.9 20.2 17.0
   Total expenditure and net lending 34.7 7.5 28.9 5.6 9.0
      Current expenditure 38.8 23.3 24.2 9.0 10.2
      Capital expenditure and net lending 31.3 -5.5 33.7 2.2 7.8
 
  (Annual change in percent of beginning-period
broad money, unless otherwise specified)
Money and credit
   Net domestic assets 11.8 9.3 1.6 23.0 21.6
      Of which: net credit to the government -22.3 -16.0 -11.1 3.7 1.3
             credit to the rest of the economy 31.1 17.7 17.5 18.9 19.4
   Broad money (M2) 24.4 19.2 16.5 12.8 12.6
   Velocity (GDP/ average M2) 5.9 5.7 5.6 5.6 5.6
   Rediscount rate (in percent; end of period;
      1999 end-June)
13.0 10.0 10.0 ... ...
 
  (In percent of GDP)
Investment and saving
   Gross domestic investment 19.1 20.4 35.5 25.6 19.8
      Government 8.0 9.3 10.6 10.7 10.5
      Other sectors 11.1 11.1 24.8 14.8 9.3
   Gross national savings 5.5 4.2 10.7 6.7 7.5
      Government 9.7 7.6 10.6 7.3 7.4
      Other sectors -4.3 -3.3 0.1 -0.6 0.1
 
Government budget
   Total revenue 11.6 11.5 11.8 12.5 13.0
   Total expenditure and net lending 23.9 22.1 24.9 23.1 22.3
   Overall balance before grants -11.9 -10.7 -13.0 -10.6 -9.4
   Total grants 9.3 8.3 12.1 7.0 6.4
   Overall balance after grants -2.6 -2.4 -1.0 -3.5 -3.0
   Domestic primary balance 0.7 -0.6 -2.6 -1.7 -1.6
   Domestic bank financing -3.3 -2.3 -1.8 0.6 0.2
 
External sector
   Current account balance before grants -17.8 -20.5 -34.1 -23.7 -15.9
   Current account balance after grants -8.7 -12.4 -22.4 -16.8 -9.6
 
  (In percent of exports of goods and
nonfactor services)
 
   Net present value of total external debt outstanding2 710.8 699.2 505.2 475.7 406.5
   External debt service (nonfinancial public sector)
      Scheduled, before debt relief 66.2 72.8 68.0 79.7 57.9
      Scheduled, after debt relief in Naples terms 19.2 20.1 24.6 26.5 19.2
      Scheduled, after HIPC assistance3 ... ... 15.5 13.4 9.1
 
(In percent of government revenue)
   External debt service (nonfinancial public sector)4
      Scheduled, before debt relief 73.9 77.1 73.3 83.3 70.5
      Scheduled, after debt relief in Naples terms 22.6 23.7 30.0 30.7 26.0
      Scheduled, after HIPC assistance3 ... ... 19.0 15.5 12.3
 
  (In millions of U.S. dollars, unless otherwise specified)
 
   External current account after grants -298 -483 -931 -759 -475
   Overall balance of payments -98 -204 -196 -485 -473
   Gross international reserves (end of period) 532 625 734 647 567
      in months of imports of goods and nonfactor services 6.8 6.7 5.0 5.5 5.0
      in percent of broad money 82.8 82.7 83.4 65.2 50.7
   Total external debt (end of period) 7,439 8,344 7,682 8,069 8,215
   External arrears (public sector; end of period)5 741 762 0 0 0
   Exchange rate (meticais per U.S. dollar; end of period) 11,543 12,366 ... ... ...

Sources: Mozambican authorities; and staff estimates and projections.
1A minus sign indicates depreciation. Figure for 1999 represents change over 12 months through March.
2Public and publicly guaranteed debt after rescheduling, in percent of three-year export average.
3Based on the amount committed at the decision point.
4Excludes IMF debt.
5In view of the best efforts being undertaken by Mozambique to conclude debt-rescheduling agreements, the country is deemed to have no arrears outstanding for programming purposes.
 

Table 3. Mozambique: Social Indicators
    Latest single year
   Same region/income group
      1970-75   1980-85   1992-97   Sub-
Saharan
Africa
Low-income

POPULATION
Total population, mid-year (millions)   10.5 13.5 16.6   612.4 2,035.6
   Growth rate (% annual average)   2.2 2.3 2.1   2.2 1.7
Urban population (% of population)   8.6 19.4 36.4   32.3 28.4
Total fertility rate (births per woman)   6.5 6.5 5.3   5.5 4.0
               
POVERTY
(% of population)
National headcount index   .. .. 69.4   .. ..
   Urban headcount index   .. .. 62.0   .. ..
   Rural headcount index   .. .. 71.3   .. ..
   
INCOME
GNP per capita (US$)   .. 250 180   510 350
Consumer price index (1995=100)   .. 1 153   118 122
Food price index (1995=100)   .. .. ..   .. ..
 
INCOME/CONSUMPTION DISTRIBUTION
Gini index   .. .. ..   .. ..
Lowest quintile (% of income or consumption)   .. .. ..   .. ..
Highest quintile (% of income or consumption)   .. .. ..   .. ..
               
SOCIAL INDICATORS
Public expenditure              
   Health (% of GDP)   .. .. ..   2.5 1.0
   Education (% of GNP)   .. 4.2 ..   4.3 ..
   Social security and welfare (% of GDP)   .. .. ..   .. ..
Net primary school enrollment rate              
(% of age group)              
   Total   .. 51 40   .. ..
      Male   .. 56 45   .. ..
      Female   .. 47 34   .. ..
Access to safe water              
(% of population)              
   Total   .. 9 24   47 69
      Urban   .. 82 44   74 80
      Rural   .. 2 17   32 66
Immunization rate              
(% under 12 months)              
   Measles   .. 39 70   58 74
   DPT   .. 29 61   53 76
Child malnutrition (% under 5 years)   .. .. 26   .. ..
Life expectancy at birth              
(years)              
   Total   42 44 45   51 59
      Male   41 43 44   49 58
      Female   44 46 47   52 60
Mortality
   Infant (per thousand live births)   168 133 135   91 82
   Under 5 (per thousand live births)   281 223 201   147 118
   Adult (15-59)              
      Male (per 1,000 population)   498 468 400   428 274
      Female (per 1,000 population)   382 361 354   375 255
   Maternal (per 100,000 live births)   .. .. 1,100   .. ..

Source: 1999 World Development Indicators CD-ROM, World Bank.
 

Table 4. Mozambique: External Financing Requirements and Sources, 1997-2005
(In millions of U.S. dollars)
    1998 1999 2000 2001 2002 2003 2004 2005
  1997 Est. Proj. Proj. Proj. Proj. Proj. Proj. Proj.

External financing requirements   4,907.3   1,128.0   2,566.3   1,364.2   1,085.4   1,060.8   1,102.6   1,095.0   1,073.1
 
  Current account deficit
     (excl. net official transfers)
610.7 796.4 1,413.0 1067.9 784.7 708.4 683.2 672.4 660.5
 
  Amortization1 216.1 274.0 282.8 382.9 381.2 416.3 450.1 418.1 387.5
  Changes in arrears (increase -) 3932.2 -20.4 761.5 0.0 0.0 0.0 0.0 0.0 0.0
  Changes in reserves (increase +)2 134.2 71.5 109.0 -86.5 -80.5 -63.8 -30.6 4.5 25.2
  Errors/omissions (outflow +) 14.1 6.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0
 
Total identified financing 729.4 866.8 1,509.0 958.1 687.4 676.4 728.8 776.8 815.3
 
  Disbursements from existing and
      new commitments
665.0 654.1 1,164.6 838.2 608.6 584.6 622.3 654.3 673.1
    Grants3 312.9 313.2 482.0 309.0 309.7 306.6 303.6 300.7 298.8
    Loans 352.1 340.9 682.6 529.2 298.9 278.0 318.7 353.6 374.4
      Bilateral 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
      Multilateral1 262.1 259.5 187.3 188.0 188.2 198.7 225.0 245.0 260.0
        IDA 148.1 133.9 100.0 130.0 130.0 150.0 190.0 200.0 210.0
        IMF 34.7 34.2 40.3 23.0 23.2 11.6 0.0 0.0 0.0
        Other 79.3 91.4 47.0 35.0 35.0 37.1 35.0 45.0 50.0
       Private sector4 90.0 81.4 495.3 341.2 110.7 79.3 93.7 108.6 114.4
 
  Disbursements from existing
     commitments
665.0 654.1 472.8 426.5 97.5 68.6 67.5 72.5 35.0
       Grants 312.9 313.2 332.0 309.0 0.0 0.0 0.0 0.0 0.0
       Loans 352.1 340.9 140.8 117.5 97.5 68.6 67.5 72.5 35.0
       Bilateral 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
       Multilateral1 262.1 259.5 140.8 117.5 97.5 68.6 67.5 72.5 35.0
         IDA 148.1 133.9 100.0 100.0 80.0 50.0 50.0 50.0 10.0
         IMF 34.7 34.2 17.3 0.0 0.0 0.0 0.0 0.0 0.0
         Other 79.3 45.7 23.5 17.5 17.5 18.6 17.5 22.5 25.0
       Commercial4 90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
 
   Disbursements from expected
     new commitments
0.0 0.0 691.8 411.7 511.1 516.0 554.8 581.8 638.1
       Grants3 0.0 0.0 150.0 0.0 309.7 306.6 303.6 300.7 298.8
       Loans 0.0 0.0 541.8 411.7 201.4 209.4 251.2 281.1 339.4
       Bilateral 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
       Multilateral1 0.0 0.0 46.5 70.5 90.7 130.1 157.5 172.5 225.0
         IDA 0.0 0.0 0.0 30.0 50.0 100.0 140.0 150.0 200.0
         IMF 0.0 0.0 23.0 23.0 23.2 11.6 0.0 0.0 0.0
         Other 0.0 0.0 23.5 17.5 17.5 18.6 17.5 22.5 25.0
       Commercial4 0.0 0.0 495.3 341.2 110.7 79.3 93.7 108.6 114.4
 
  Direct foreign investment 64.4 212.7 344.4 119.9 78.8 91.8 106.5 122.5 142.1
 
Debt relief5 4177.9 261.2 127.2 0.0 0.0 0.0 0.0 0.0 0.0
 
Remaining gap6 0.0 0.0 930.1 406.1 398.0 384.5 373.8 318.2 257.9

Sources: Mozambican authorities and staff estimates and projections.
1Including the Fund.
2Excluding the Fund.
3Includes IDA interim assistance under the HIPC Initiative in 1999 (US$150 million).
4Private sector borrowing.
5Assumes rescheduling of private debt of the Cahora Bassa hydropower project in mid-1997. Includes only concluded agreements with Paris Club creditors and Brazil. Debt relief in 1998 and 1999 includes US$23 million of interim assistance provided by Paris Club creditors under the HIPC Initiative. Part of this assistance (the topping up of the 1996 flow rescheduling to Lyons terms) is included above the line as reduced debt service payments.
6Financing gaps after mid-1999 to be covered by HIPC assistance and the application of traditional rescheduling mechanisms by non-Paris Club creditors.

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