The President said the country was already enjoying the fruits of peace and initial reconstruction, and had consolidated the democratic institutions emerging from the elections. "We have built solid foundations for the rule of law in which the growth of awareness of civil society is growing, both in terms of political parties, and in society at large", Chissano added.
He declared that the Frelimo government "has shown that it is competent, capable and dedicated in solving the nation's problems, as demonstrated by economic growth, by the increase in exports, by the fight against inflation, by the trust of foreign investors, and by the unprecedented growth of new and important undertakings that create employment and wealth".
Victories in reconstruction, Chissano continued, resulted from "the selfless work of our party, and our members and supporters". "But we have always been fully aware that economic growth will have to be maintained in a sustainable way and with increasingly high growth rates for several more years so that its effects are more visible for the majority of our people", he warned.
Chissano was sure that the Congress would "galvanise and revitalise our Party at all levels so that we may face the challenges of the next millennium". The Congress, he added, would change the Party's programme and statutes so as "to adapt them to the development dynamic of our country and the world".
Unlike previous post-independence congresses, which have been held in central Maputo, this one is taking place overlooking the Matola river on the city's outskirts. Here a huge tent has been thrown up on what is usually the football field of the Frelimo Party School, with space to seat all 700 delegates and 300 guests.
Meeting in their own premises, the Frelimo leadership and delegates were clearly in a relaxed and jovial mood, laughing at claims in the pro-Renamo news-sheet Imparcial that the Congress will see Chissano retire from the post of Party president, and will call for opposition figures to be appointed to half a dozen government portfolios.
15 foreign delegations from communist and social democratic parties and other progressive organisations attended the congress. When the foreign delegates were introduced to the congress by Frelimo general secretary Manuel Tome, the largest cheer went up for the delegation from the African National Congress, led by its interim general secretary Cheryl Carolus.
Several other ruling parties from the sub-continent are represented - the MPLA of Angola, the Democratic Party of Botswana, Chama Cha Mapinduzi of Tanzania, ZANU-PF of Zimbabwe, and the United Democratic Front of Malawi. Among opposition parties who have sent delegates are the United National Independence Party (UNIP) of Zambia, and the Party of Social and Democratic Convergence (PCDS) of Equatorial Guinea.
Two movements still fighting for their countries' independence were warmly welcomed by the congress delegates - the Polisario Front of Western Sahara, and FRETILIN of Indonesian-occupied East Timor.
There were just two European delegations - from the Portuguese Communist Party and the Swedish Social-Democratic Party. Also present were the Chinese and Vietnamese Communist Parties.
Prime Minister Pascoal Mocumbi said in Maputo on 17 May that he expected foreign financing for the Mozambican economy to reach $955 million this year - $15 million more than the $940 million of 1996.
Speaking on his return from the annual meeting in Paris of the World Bank's Consultative Group on Mozambique, he said that the government's funding requirements put before the group had been met in full.
Confirmed credits and pledged donations amounted to $560 million dollars. Mocumbi said the breakdown of this was 55 per cent for investment, 28 per cent for balance of payments support, six per cent for food aid, and 11 per cent for "other programmes".
The rest of the $955 million is accounted for by debt relief, and by a credit from the International Monetary Fund (IMF), which is at an advanced stage of negotiation. Mocumbi was confident there would be no last minute hitch in granting this credit.
The Prime Minister said the meeting produced "excellent results, particularly when we refer to the quality of the dialogue between Mozambique and its partners".
The dialogue is no longer about coping with emergencies, he said, it is about the medium and even the long term. The Consultative Group had switched away from urgent, short term vision to a consideration of development over the longer term.
Mocumbi said the donors at Paris had agreed with the government's priorities - including providing small scale credit for the peasant family sector in agriculture, strengthening the national business class and reforming the public administration.
Facilitating the growth of the private sector meant providing a friendlier legal environment, by reducing unnecessary red tape, but also ensuring access to credit.
This means dealing with debts that businesses accumulated during the war of destabilisation through no fault of their own. One of the government's schemes accepted by the Paris meeting is for a fund which will be used to pay off these companies' debts to the banks, thus making them once again eligible for credit.
Among the reforms of the public administration proposed is a substantial wage increase in the civil service, and a widening of wage differentials in order to attract and retain qualified staff in the middle and upper levels of the state apparatus.
Mocumbi said no objections had been raised to this scheme. In the past, the IMF has objected to such wage rises on the grounds that they generate inflation - but this time the Fund seems to be going along with the idea. Mocumbi said that, in the past, the IMF had an "immediatist" rather than long term approach to such issues. The Prime Minister added that donors had agreed that donor-funded projects should not run parallel to the state budget, but should be integrated into it.
Mocumbi said that this time the Consultative Group made no criticisms of the government and raised "no negative points" - in sharp contrast to 1996 when donors had expressed concern at corruption and drug trafficking.
Borrowing requirements are put at $306.6 million and grants of $334.9 million were requested (including items for food aid, balance of payments support, mine clearance and local elections).
On top of this come "additional financing requirements" of $50 million dollars. This includes the creation of a "foreign debt alleviation fund", of $25 million, on the lines of one created by Denmark and Holland last year. This is essentially a way whereby friendly bilateral donors can pay off Mozambique's unsustainable debt to multilateral agencies such as the IMF.
Also in the "additional finance" is $10 million to rehabilitate the rural commercial network, which has not yet recovered from the destruction imposed by the Renamo rebels during the war of destabilisation, and $10 million to create a "fund for the financial clean-up of the business sector".
This fund is aimed at helping the private sector recover from indebtedness and decapitalisation caused by the war. It will look at "non-performing credits attributable to the war" on a case by case basis, and then pay selected debts back to the banks.
The companies involved will have to repay the fund eventually, on conditions and a timetable determined by the fund's management commission. That repayment, the government's position paper for the Paris meeting suggests, could either simply revert to the state budget, or form "a private sector guarantee fund within the banking system to ensure greater access to credit for private businesses".
The advantages of this scheme are that, by reducing the amount of bad debt in the banking system, it frees resources for new credits. With the burden of debt lifted, companies will become eligible for new bank loans. It is a way of recapitalising businesses - but is entirely dependent on donor good will.
The government also requested a relatively small amount - $5 million - to beef up the Economic Rehabilitation Support Fund (FARE). This fund makes loans of up to 100 million meticais (about $8,700) to small businesses and micro-enterprises at preferential interest rates.
So far FARE has been funded out of proceeds from privatisation. This money is only enough for a limited number of schemes in four northern and central provinces. The government wants donor support to expand FARE to the entire country and turn it in the medium term into an autonomous financial institution, aimed at promoting development.
The government promises a 4 per cent real increase in the health and education services compared with 1996, and states that in 1997 health, education and rural water supply will account for 31 per cent of public investment.
The Government paper argued that overcoming poverty requires financial support for the peasant family sector: notably through the promotion of small savings banks in the countryside. Such rural banks should involve the local community in their management and function as savings mechanisms for the collection of family-sector savings. Agricultural marketing is also regarded as determinant for peasant living standards, and the government states that international support is needed to restore the trading network which, prior to the war, ensured the transfer of agricultural surpluses to market, and the distribution of consumer goods in the countryside.
Mocumbi also told donors that debt relief, either through the Paris Club or bilaterally, was of the greatest importance. So too was the question of Mozambique's eligibility for the new initiative to relieve both the bilateral and the multilateral debt of Highly Indebted Poor Countries (HIPC).
The World Bank's country director for Mozambique, Phyllis Pomerantz, on 15 May claimed there was "new dynamism" in the Mozambican economy "that catches the eye of even the casual observer".
At the opening of the summit in Paris, she said that "the momentum for economic growth which began with the end of the war continues. GDP growth accelerated to over six per cent last year, the grain harvest was the highest in 20 years, cashew output more than doubled, and the recovery of the industrial sector continued for the second consecutive year. Growth with stabilisation has become a reality".
Pomerantz noted that the exchange rate remained stable, interest rates were beginning to fall, and monetary policy has become much more effective. In fact, Mozambique may be one of the few countries in Africa where financial sector reform is taking hold, she added.
She predicted that Mozambique's most pressing priority over the next few years will be to expand domestic revenue, especially given falling aid levels, and the country's still enormous needs.
Critical to this effort, she claimed, would be customs reform and the introduction of Value Added Tax. "These will be difficult reforms and we must stand ready to help", she declared.
Pomerantz explicitly backed the government's education and health priorities, and its stress on capacity building. She also indicated World Bank backing for adequate incentives for civil servants.
She also backed substantial reduction in Mozambique's foreign debt burden. "Fiscal sustainability hinges on Mozambique's receiving deep and meaningful debt relief", she stressed. Pomerantz also wanted to see Mozambique accepted as eligible for the new Highly Indebted Poor Countries (HIPC) initiative.
IMF representative Sergio Leite raised Mozambique's debt to the former Soviet Union as a possible obstacle to the country's eligibility for HIPC treatment.
The IMF estimates Mozambique's debt to Russia at about $2.2 billion out of a total foreign debt of over $5 billion.
"A complete debt sustainability analysis for Mozambique requires information on the expected treatment of Mozambique's debt to the Russian Federation", he claimed.
Leite said that a decision on Mozambique's eligibility for assistance under the HIPC initiative would only be taken "once agreement has been reached between Russia and the Paris Club on the handling of Russia's claims".
The Paris Club - which consists of the main western creditors, and Russia are discussing "comparability of treatment among creditors", and Mozambique's future hinges on the outcome of these negotiations.
The United Nations Development Programme (UNDP) on 15 May warned that Mozambique's foreign debt "is a major handicap to development".
Addressing the Paris meeting, Solomon Akpata, the head of the UNDP's southern Africa division, pointed out that total debt service is now four times GDP, while debt service represents 116 per cent of exports. Debt service for 1997 is higher than the total wage bill for the civil service, he said. Net debt service increased from $69 million in 1995 to a scheduled $110 million in 1997.
"We agree with the government that the benefits of liberalisation ought to have a swifter impact on people's everyday life", added Akpata, "and that the debt problem prevents this to the extent that it reduces the government's already scarce resources at a time when we are encouraging the government to reallocate resources to ensure equitable growth for poverty alleviation". Akpata said the UNDP therefore hoped that Mozambique would qualify for HIPC status.
He noted that a study undertaken by the World Bank itself highlighted that 64 per cent of growth is attributed to human and social capital as opposed to physical or natural capital.
Akpata welcomed the government's "financial and policy efforts over the last few years in health and education sectors" and looked forward "to seeing major spending on education and health as the basis for a poverty alleviation strategy".
In the latest clash arising from attempts by the former rebel movement Renamo to demonstrate against alleged "misgovernment" and the high cost of living, police on 15 May dispersed a crowd of about 50 people gathered outside the Renamo offices in the central city of Chimoio.
The police moved in on the protesters before they had begun to march. Reports say that six people were injured, one of them seriously. Two people were arrested.
The Manica provincial police commander, Jose Miquicene, defended the action, saying "we acted correctly to defend the law and public order. We could not allow the law to be violated and the city disturbed".
Renamo's Manica provincial political delegate, Albino Faife, protested that the police "prevented citizens from expressing themselves freely".
Meanwhile, in Beira, the presiding judge of the Sofala Provincial Court, Inacio Ombe, said that the 31 Renamo protesters who were arrested following illegal demonstrations on May 5 and May 12 will stand trial for breaches of public order.
The public order offences involved are not serious, and carry a maximum sentence of three months imprisonment.
In the province of Zambezia, Renamo has sacked its secretary for mobilisation in the district of Morrumbala, Josiah Camisola, who denounced Renamo as an "undemocratic" party, and said the wave of demonstrations is entirely a Renamo initiative, and is not organised by the people as Renamo claims.
Afonso Dhlakama, leader of Renamo, claimed that the current wave of demonstrations will spread to the south of the country, particularly to Maputo, in the near future. Dhlakama threatened that demonstrators would march on President Joaquim Chissano's office.
Since 5 May Renamo has held several street demonstrations in the centre and north of the country. Most have been dispersed by the police, and over 60 arrests have been made. The authorities say that the demonstrations are illegal, since Renamo is refusing to comply with the 1991 law regulating demonstrations.
Dhlakama said that the use of force by the police against the demonstrations meant that Frelimo had declared war against Renamo and against the public.
"The people demand from the government better living conditions. They demand the better future that was promised. And Frelimo, trampling on all democratic principles, responds to these demands with armoured cars, AK-47s and other kinds of force".
He said that, as leader of the opposition, he might join demonstrations, and wave the Renamo flag outside Chissano's office.
A consortium of South African and Brazilian mining companies is interested in the Moatize coal mines, in the province of Tete, according to the Deputy Minister of Mineral Resources and Energy, Castigo Langa.
Langa added that the government is looking at the matter favourably and hopes the project will go ahead, because the consortium "has the necessary resources". Speaking on 15 May, Langa said that "within a few days we will meet with the consortium on the matter".
The Moatize coal mines have the capacity to produce about 10 million tonnes of coal a year, and available data estimate the deposit's reserves at 10 billion tonnes.
The fact that the railway from Moatize to the port of Beira remains closed continues to be the stumbling block for the export of coal from Moatize. The line was destroyed by the South African backed Renamo rebels during the war of destabilisation, and the cost of rebuilding it is estimated at $300 million.
Langa said there are viability studies under way, financed by the World Bank. An alternative would be to carry the coal on barges down the Zambezi river. Langa said an Australian mining company has completed feasibility studies on this and is expected to submit a report on its findings shortly.
Work is also under way to rehabilitate tantalite mines in Muiane and Morrua, in the province of Zambezia. In 1981, these two mines produced 100 tonnes of tantalite. But they closed down during the war. Mozambique was once the third largest exporter of tantalite in the world.
The government considers the rehabilitation of these mines as very important, not only because of the high price of the mineral on the international market, but also for the jobs they provide. When the mines were fully functional, they employed more than 2,000 people.
Prospection is also under way for gold in the provinces of Manica, Sofala, Tete, and Niassa.
Mozambique News Agency,
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London WC1V 6RL,
Tel: 0171 404 3230, Fax 0171 404 3231
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