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Republic of Mozambique—Enhanced Structural Adjustment Facility
Policy Framework Paper for 1998–2000


Mozambique: Summary and Time Frame for Implementation of Macroeconomic and Structural Adjustment Policies, 1998–2000

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

1.  External Sector
1.1  Trade policy Rationalize import tariffs. Lower the top import tariff rate from 35 percent to at least 30 percent. By April 1, 1999
1.2  Aid commitments Improve the efficiency of utilization of aid funds. Encourage donors to (a) untie their aid and harmonize procurement procedures;
(b) avoid placing excessive emphasis on project financing without due regard to recurrent needs; and (c) provide regular information on the use of aid funds (recurrent, investment, and technical assistance).
1.3  External debt Reduce the debt-service burden and improve the debt-service profile. Limit official external medium- and long-term borrowing on nonconcessional terms, and the increase in public and publicly guaranteed short-term debt. Throughout

2.  Pricing policy
2.1 Ensure viability of industries with regulated prices. Adjust public enterprise prices (water, transport, electricity, petroleum and communications) at quarterly intervals or in accordance with approved formulas to at least cover domestic and import costs, and to ensure commercial viability. Increase rents on state-owned property by at least as much as inflation. Throughout

3.  Fiscal policy
3.1  Fiscal
Improve efficiency of fiscal management, including expenditure controls, budgetary procedures, and treasury operations. Develop medium-term expenditure framework. June 30, 1998
3.2   Review and restructure project portfolio; in particular, complete review of African Development Bank (AfDB) project portfolio. 1998-99 (AfDB portfolio by December 1998)
3.3 Identify off-budget flows by March 1999 and include them in the budget for 2000. 1998-1999
3.4 Maintain up-to-date database on onlending agreements; project debt service due on these agreements over next ten years; and include next year’s debt service in the government budget. December 31, 1998
3.5 Prepare a draft of the new, consolidated system of public accounting, including the computer systems model and the execution model. June 30, 1999
3.6 Implement computerized budget management system. End-1998
3.7 Prepare consolidated public sector accounts. December 31, 1999
3.8  Revenue
Improve customs effectiveness and revenue. Submit to parliament Lei do Contencioso Aduaneiro and Lei dos Tribunais Aduaneiros. June 30,1999
Redefine the role of the preshipment inspection in the context of the introduction of the single administrative document for customs clearance December 31, 1998
Begin implementation of customs staff reorganization. July 31, 1998
3.11 Improve tax administration. Introduce single administrative document to replace BRI, CRF, and despacho aduaneiro. October 1, 1998
3.12 Implement tax reform. Decide the VAT tax rate to propose to the Council of Ministers July 31, 1998
Initiate VAT publicity campaign. July 31, 1998
Submit VAT code to Council of Ministers and inform public. July 31, 1998
Create the new organizational structure for the VAT unit and appoint the project manager and the chiefs of the subunits. June 30, 1998
Select VAT computerization system and agree on an implementation plan with the company providing the system. August 31, 1998
Complete VAT tax register and reconcile with turnover and industrial tax registers. End-November 1998
Introduce VAT. April 1, 1999

4.  Governance and public administration
4.1 Achieve greater accountability within government. Prepare action plan to strengthen the auditing function in government, including capacity building. June 30, 1999
Submit to Council of Ministers decree regulating government procurement practices and the control of public assets. End-1998
4.3 Reform civil service Finalize new classification of career streams and compensation structure for the civil service. Implement thereafter. End-July 1998. Implementation by April 1999.
Adopt decree on career streams and remuneration system. September 30, 1998
4.5 Decentralize public administration Submit local government tax code to the Council of Ministers. September 30, 1998
4.6 Support the electoral process Provide adequate resources to the institutions involved in the elections, including the Technical Secretariat for Elections (STAE). In the context of the 1999 budget

5.  Monetary policy
5.1  Financial market
Develop indirect monetary policy instruments. Establish electronic network among all commercial banks to carry out interbank transactions in foreign and domestic currency. June 30, 1999
Finance Treasury exclusively through placement of government securities in the money market. Throughout, from July 1, 1998
Charge penalties of at least the rediscount rate on reserve shortfalls and overdrafts. Throughout
5.4  Central bank
Improve timeliness and effectiveness of policy measures. Improve central bank accounting to allow the monetary accounts to be compiled directly from balance sheet information Ajustes to be eliminated in the first half of 1999
Begin monthly forecasting of demand and supply of foreign exchange. September 30, 1998
5.6  Interest rate
Signal policy stance to markets. Keep the central bank rediscount rate positive in real terms. Throughout
5.7  Payments system Raise effectiveness of financial system. Complete study on standardization of checks. April 30, 1999
Bring into operation register of bad checks. September 30, 1998

6.  Financial sector reforms
6.1  Improve monetary
       control and the
       health of the
       financial sector.
Develop a competitive and sound banking system Complete full on-site inspections of all commercial banks. During 1998
6.2 Require commercial banks to publish half-year financial statements. End-1998
6.3 Develop institutions
that promote private saving
Introduce regulations on microcredits. September 30, 1998
Complete actuarial analysis of the public pension schemes. June 30, 1999
Complete actuarial analysis of the pension scheme of the National Social Security Institute. December 31, 1999

7.  Private sector development
7.1 Improve business environment Revise decrees (diploma ministerial) 17/91 and 21/91 so as to simplify registration and operation of importers. October 1, 1998
Adopt revision of Decree 7/83 to simplify the licensing of foreign business representative offices. August 31, 1998
Submit draft commercial code to the Technical Council of Justice. December 31, 1999
Submit the Industrial Law to the Assembly of the Republic. August 31, 1998

8.  Public enterprises
8.1 Restructure public enterprise sector. Bring to the point of sale all the large public enterprises from UTRE’s list dated June 2, 1998, except EMOSE. (EMOSE will be made a limited-liability company, sociedade anónima). September 30, 1998
Complete sale of all state-owned small- and medium-scale enterprises. June 30, 1999
Maintain government financial assistance to all enterprises below 1 percent of GDP. Throughout
8.4 Compile list of all enterprises in which the government holds any share of ownership and provide the amount of 1997 dividends obtained from these firms. End-1998

9.  Energy policy
9.1 Promote development of energy resources. Formulate a comprehensive strategy for development of energy resources and submit to Council of Ministers. September 30, 1998
9.2 Improve efficiency of public enterprises in the energy sector. Ensure that PETROMOC becomes current on all taxes and stays current thereafter. September 30, 1998
Conduct inventory of PETROMOC’s surplus assets and adopt asset divestiture plan. End-1998

10.  Agricultural policy
10.1 Improve allocation and monitoring of sectoral resources and efficacy of sector investment. Adopt and commence implementation of a sector expenditure program (PROAGRI), including policy framework and restructuring of investment portfolio. March 30, 1999
Ensure no explicit or implicit subsidization of the Cereals Institute of Mozambique (ICM). Throughout
10.3 Raise income and security of the rural poor. Adopt regulations to implement land law, incorporating views of small-holders, local communities, and private investors. December 31, 1998

11.  Social policy
11.1  Health Rebuild the health system, particularly in rural areas and districts affected by the war. Implement Health Sector Recovery Program so as to increase provision of health service units per inhabitant. In particular: (a) raise DPT coverage of population to 60-65 percent; (b) reduce index of geographic inequality in the provision of health care services to 2.6; (c) increase proportion of health posts/centers stocked with Essential Drugs Program kit to at least 50 percent; and (d) increase the proportion of health posts/centers staffed with trained personnel to 80 percent. 1998-2000 benchmarks
(a)-(d) to be met by mid-1999
Increase share of current expenditures on health in total current expenditures annually. 1998-2000
Monitor indicators (a)-(d) above. Throughout
11.4  Education Improve quality of primary and secondary education; increase access to education; target programs for girls, especially in the center and north of the country; and improve management of education. Finalize preparation and begin implementation of sector expenditure program, so as to increase coverage and quality of education, as measured by (a) an increase in the primary gross admission rate by 2-3 percentage points a year; (b) a rise in the number of primary school teachers by 10 percent a year, while maintaining the share of qualified teachers at about 70 percent; (c) an increase in the primary school completion rates by at least 1 percentage point a year; and (d) maintenance of availability of textbooks at one per pupil. 1998-2000
Increase the share of current expenditures on education in total current expenditures annually. 1998-2000
Monitor indicators (a)-(d) above. Throughout
11.7  Poverty Improve targeting and effectiveness of poverty reduction programs. Complete poverty assessment, including poverty profile and covering both urban and rural areas. October 30, 1998
Complete a poverty action plan. December 31, 1998
11.9 Improve food security. Submit food security strategy to Council of Ministers. September 30, 1998

12.  Environmental policies
12.1  Regulatory
Promote sustainable use of natural resources through improved management and clarification of access rights. Develop national management programs for wildlife, fisheries, forestry, and nontimber products that will define the policy and legal framework, and will clarify rights to these natural resources, taking into account traditional rights. September 30, 1999
Adopt detailed regulations for environmental assessment. December 31, 1998
Establish the environmental assessment review system, including capacity building. May 31, 1999
12.4  Water and
Ensure rational and equitable comanagement of internationally shared water resources. Adopt a new strategy in water resources management, providing a framework for water allocation, pricing, and demand management of the southern rivers. March 30, 2000
12.5 Improve access to clean water. Award contracts for the private management of the five major water supply systems (Água de Maputo, Beira, Nampula, Pemba, and Quelimane). By June 30, 1999
Increase water tariffs in real terms. By June 30, 1999

13.  Transport and telecommunication policies
13.1  Public expenditure Eliminate road transport bottlenecks affecting domestic and international trade. Ensure sustainability of expenditures on road rehabilitation and maintenance by prioritizing maintenance needs. Throughout
13.2  Increase private
Remove barriers to competition and to an enhanced private sector participation in transport and telecommunications. Complete transformation of LAM into a limited-liability company. In the meantime, provide six-month information on sales, profits, and leverage (liabilities/capital), as well as government subsidies, if any. December 31, 1998
Encourage competition in cellular phone services by promoting entry of new private sector providers into sector. End-1998
13.4 Implement restructuring plan for CFM. Sign the memorandum of understanding for the concession of CFM-South. September 30, 1998
Complete bidding process, including evaluation of proposals for CFM-North. December 31, 1998
Complete bidding process, including evaluation of proposals for CFM-Center (excluding the Sena line). September 30, 1999

14.  Statistics
14.1  Compilation of
Improve quality and timeliness of statistical information for decision making and analysis. Produce definitive monthly monetary survey and supporting data within 30-45 days of the month’s end. Throughout
Prepare national accounts for 1996 and 1997 incorporating 1996 household survey results. Preliminary accounts by September 1998 and final by December 1998
Compile quarterly production indicators starting with the first two quarters of 1998 and bring compilation lag to at most one month. By end-January 1999
Produce quarterly BOP figures within 45 days of the end of the quarter. From June 30, 1998
14.5  Dissemination of
Improve information on economic and social trends. Make public the budget execution on a quarterly basis (within 45 days of the end of the quarter). Throughout
Publish national price index. February 28, 1999
Publish statistical abstract for 1996 household survey. July 31, 1998
Publish census results. June 30, 1999
Publish monthly data on commercial bank interest rates. Throughout