1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

M O Z A M B IQ U E
combined with a set of measures implemented by the
authorities aiming at improving its reve nue collection.T h e re was
a slight worsening of the fiscal deficit as a percentage of GDP,
which is mainly attributable to the increase of expenditure more
than reve nu e. It should be noted however that a 23 perc e n t
i n c rease in trade related reve nue has been achieved since the
contracting of the British Crown Agents in May 1997 to assist in
the operation of the customs serv i c e.
The cumu l a t i ve average inflation rate up to end-December 1997
declined sharply to 5.8 percent from a level of 24.3 percent in
the same period of the previous ye a r.The slow down of inflation
is a result of the improvement in the monetary contro l ,
exchange rate stability, and the strong supply response in the
e c o n o my. In fact,inflation begun a declining trend in 1995 with a
c u mu l a t i ve rate of 54.2 percent after 70.0 percent in 1994.
The current account, in nominal US dollar terms, i m p roved by
4.2 perc e n t ,as a result of the increase in exports by 6.7 perc e n t
with imports increasing by 0.8 perc e n t .
The currency (Metical) maintained a strong perfo r m a n c e,
resulting in a cumu l a t i ve nominal depreciation of only 1.5
p e rcent in the official exchange market and an ap p reciation by
1.7 percent in the parallel marke t . As a re s u l t , the spre a d
b e t ween the exchange rates of the two markets re m a i n e d
b e l ow 2 perc e n t .The exchange rate stability was mainly due to
a tight monetary policy, the good performance of the external
sector combined with favourable inflows of external assistance
f u n d s , as well as the dynamism of the interbank exchange
m a r ke t .
M o n ey supply growth has increased slightly from 13.2 perc e n t
in 1996 to 16.6 percent in 1997.The authorities shifted tow a rd s
i n d i rect monetary contro l , with the creation of the interbank
m o n ey market in September, w h e re tre a s u ry bills and monetary
authority bill are traded. The interbank money market also
a l l ows commercial banks to lend and borrow funds to each
o t h e r. The interbank exchange market operation has been
i m p rove d ,with the introduction of non-fixing sessions.
With the conclusion of the Paris Club A g re e m e n t s ,about 10
p e rcent of the Mozambican external debt was re d u c e d . O f
these USD500m we re rescheduled and USD100m cancelled.
A dd i t i o n a l ly, in recognition of the country ’s re c o rd of economic
re fo r m s ,the World Bank and the IMF along with other donors
decided on April 7, 1998 to provide exceptional support ,
amounting to USD2.9 billion in nominal terms in debt serv i c e
relief for Mozambique, equivalent to USD1.4 billion in Net
P resent Value terms in June 1999.
With this initiative Mozambique’s external debt will be re d u c e d
f rom USD5.6 billion in late 1996 to USD1.1 billion in June 1999
when the HIPC (Highly Indebted Poor Countries) package is
i m p l e m e n t e d .Debt service payments will have been reduced to
b e l ow 20 percent of export earnings.The stock of debt in NPV
terms will be reduced to 200 percent of export s ,c o m p a red to
466 percent without the initiative.
Financial Institutions
The Government of Mozambique and the World Bank have
d eveloped a financial sector adjustment programme aimed at
i m p roving the efficiency of the banking sector, d eveloping the
m o n ey and capital marke t s , and fo r mulating better re g u l a t i o n s
governing the sector.
The Banco de Moçambique was split into a central bank and a
c o m m e rcial bank (Banco Comercial de Moçambique) in 1992.
The independence of the central bank was laid down in law,
although it is stated that the bank must respect the economic
policy defined by the gove r n m e n t . Since then it has increased its
independence and expanded its oversight cap a b i l i t i e s .
T h e re are seven commercial banks operating in Mozambique,
and some are beginning to take steps fo r w a rd in terms of
o f fering their customers new products and taking marke t -
oriented initiative s . The newest entrant on the banking scene is
Banco Internaçional de Moçambique Investimento that was
c reated in early 1998. The bank is co-owned by Po rt u g u e s e
Banco Commercial Po rtuguês (25 perc e n t ),its subsidiary Banco
International de Moçambique (50 percent) the IFC (15 perc e n t ),
and the parastatals Te l e c o m municações de Moçambique and
Electricidade de Moçambique each own 5 perc e n t . B I M
I nvestimento will concentrate on joint-ve n t u res in connection
with the current privatisation pro g r a m m e, and on the
d evelopment of links with South A f r i c a . Electricidade de
M o ç a m b i q u e ’s interests in the bank is associated with its
p robable invo l vement in future hy d roelectric projects in the
Zambezi valley and the construction of an aluminum smelter
outside Map u t o.
In September 1997 the government sold sixty percent of the
last state-owned bank, the Pe o p l e ’s Development Bank, t o
Southern Bank Berhard of Malaysia and a Mozambican private
c o m p a ny, I nve s t e c. The state retained 20 percent of the share s
and 20 percent we re re s e rved for bank employees and
m a n a g e r s . Liberalisation of the insurance sector is also
p ro c e e d i n g , but as yet there are no long-term insurers in
M o z a m b i q u e.
The money market is still undeveloped in Mozambique, a l t h o u g h
the legal framework for a money market is under finalisation.
The central bank issues short-term bonds on a quart e r ly basis,
which are sold mainly to commercial banks. The info r m a l
m o n ey market is used extensive ly.
Mozambique Stock Exchange
One of the key reasons for the establishment of a stock
exchange in Maputo is to provide a vehicle for the facilitation of
the privatisation pro g r a m m e. The “Installation Commission fo r
the Mozambique Stock Exchange” was consequently set up
under the Ministry of Planning and Finance in 1997 to pre p a re
for the establishment of the exchange. The work is curre n t ly in
its final stages and the market is expected to open befo re the
end of 1998.
E x c h a n ge Contro l s
Fo reign investors are permitted to operate both local and
fo reign currency accounts. Fo reign currency accounts fo r
i nvestors may be denominated as retention accounts, m e a n i n g
the availability of fo reign currency is guaranteed. Fo re i g n
retention accounts, w h e re fo reign currency receipts fro m
M o z a m b i q u e - d e r i ved production and sales are re c e i ved and
held in fo reign bank accounts, a re permitted on a case-by - c a s e
b a s i s .
The right to repatriate cap i t a l ,dividends and other distributions
of profit is guaranteed by law to fo reign inve s t o r s .Firms are
obliged to register all imports of goods or money with the
Central Bank. F u t u re repatriation of non-re g i s t e red inve s t m e n t
is not guaranteed.
Fo reign Tr a d e
M o z a m b i q u e ’s principal trading partners are South A f r i c a ,
Po rt u g a l ,S p a i n ,USA and Jap a n . Due to the limited industrial and
food production in Mozambique, the value of the country ’s
i m p o rts far exceeds that of its export s .
The country ’s main export products are cashew nu t s , p r aw n s ,
lobster and cotton. Main import goods are transport and
electrical equipment, food and ve g e t a b l e s .
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