Evangelos Calamitsis, director of the African Department, replies to last week’s criticism of the IMF’s policies in Mozambique
MOZAMBIQUE deserves better treatment from those who, like Joseph Hanlon, would claim to be its friends. His portrayal of a country whose desperate economic condition threatens to reawaken unrest (IMF pulls plug on Mozambique, Mail & Guardian, January 10 to 16) does an injustice to Mozambique’s achievements.
He says “the poorest country in the world is growing poorer”. In fact, over the past decade, Mozambique’s economy has grown strongly, despite natural disasters and a war. Since 1987, per capita income (at 1990 prices) has increased by 43%.
Inflation for the first 11 months of 1996 was just 15% and, since mid-1994, industrial production has grown strongly.
Hanlon states that the International Monetary Fund (IMF) has insisted donors spend on reconstruction 115-million less in 1996 than in 1994. But the IMF welcomes donor assistance to Mozambique, and no IMF condition would be breached if Mozambique received additional foreign aid and spent it on reconstruction.
Since 1987, with IMF support, Mozambique has implemented adjustment programmes aimed at increasing supply, not merely reducing demand. They have eliminated domestic price controls, liberalised exchange and trade, and led to the restructuring and privatisation of loss-making public enterprises.
Credit to the economy in 1996 will have expanded by close to 32%. There are also credit schemes for small and medium-sized enterprises.
In 1991, a cash transfer scheme for the urban poor and vulnerable groups was revived and now reaches almost 90 000 households. However, such schemes alone cannot resolve the problem. So the government, with the help of the World Bank and donors, is working on programmes to provide adequate spending on education and health, while reducing unproductive outlays.
It is, therefore, hard to understand why Hanlon suggests that structural adjustment has failed. From 1981 to 1986, under central planning, Mozambique’s real gross domestic product declined by 28% and per capita income by 45%. Exports fell. Food production declined and the country became dependent on food aid. External debt became unmanageable.
Now foreign capital and know-how are beginning to flow into Mozambique, creating opportunities for increased employment. Inflation is down, exports are expanding and growth continues.