World Bank upbeat on Mozambique’s economy

Mozambique’s target of 8% economic growth this year is realistic despite floods and cyclones which hit the country this year, a World Bank official said.

The World Bank’s Mozambique director Michael Baxter also said inflation, which stood at 8,4% in 2007, could be kept in single digits in 2008.

”We believe, and everybody else agrees, the 8% growth rate is realistic and achievable despite all the traditional shocks of natural calamities,” he told Reuters in an interview conducted on Thursday.

The World Bank is the largest donor to Mozambique, where the economy grew 7,5% in 2007. Its role has focused on budget support and reconstruction projects.

Huge interest from foreign companies in the country’s natural and mineral wealth has put pressure on the government to develop infrastructure and power sources, which could boost regional trade.

Growth is largely driven by foreign aid, while the local economy has been slow to develop, especially small- and medium-sized firms that struggle to secure financing.

Mozambique was one of the world’s poorest nations at the end of a 17-year civil war in 1992, but has had one of the fastest growing economies in Southern Africa over the past decade.

The former Portuguese colony’s government has embarked on reforms to stabilise the economy, which, coupled with Western donor aid and political stability, have boosted economic growth.

But most of the country’s population of 20-million live in poverty, and depend heavily on subsistence agriculture.

Restraining expenditure

Baxter said investment would boost the economy, but fiscal discipline and prudent financial management were essential.

”It is possible because the strong growth continues in the large projects and construction while investments are increasing tourism,” said Baxter, who also oversees World Bank operations in Angola, Malawi, Zambia and Zimbabwe.

”Although the challenge is to restrain expenditure and manage the budget.”

Mozambique is hungry for foreign investment.

The government is eager to upgrade the Cahora Bassa hydro-electric plant, which was built under Portuguese colonial rule in 1960 and then badly neglected during a civil war after independence in 1975.

Cahora Bassa has the potential to generate 14 000 megawatts of power, about seven times current capacity, according to the government in Maputo. But getting it to that level will require major investment.

China became the sixth largest foreign investor in Mozambique last year while the United States topped the list with $5-billion worth of investment, officials say.

Mozambique’s Investment Promotion centre (CPI) said China invested $60-million in 11 projects in agriculture, aquaculture, public works and forestry.

Turning to the election crisis in Zimbabwe, Baxter said the bank planned to help after results of the disputed March 29 poll were announced.

”We are more than ready to assist when those conditions are in place on a larger scale although there is some backlog of issues to clear up,” he said.

”For example, how are we going to assure the payment of arrears and guarantees of future payments.”

Zimbabweans are suffering from chronic food, fuel and foreign currency shortages, high unemployment and the world’s highest inflation rate of 165 000%. ‒ Reuters

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