Economic situation Up to the early 2000 floods, the Mozambican economy was still showing very high growth rates. Similarly both investment and foreign aid inflows are still very substantial. Aid inflows constitute about 35% of total GDP, which by itself is a major danger in terms of dependency. The high growth rates should be seen in a perspective of Mozambique being one of the world's poorest countries with a GDP of about 140 US$ per capita. Furthermore the GDP figures made a technical jump in 1998/99 after a census indicated that population is approximately 16 millions and not 19 millions as initially believed. Despite the fact that the country is still smarting from the disastrous 2000 floods and that parts of the country were affected by the 2001-2002 drought, the economic outlook for Mozambique remains favourable. The rate of GDP growth in 2001 (13.9%) indicates that the country has returned to the rapid pace of economic expansion experienced in the mid 1990s. From 1994 to 2001 the rate of real GDP growth averaged 8.2%. The government is assuming greater control over policy formation in its relationship with the World Bank and other foreign partners. Poverty reduction is assuming a greater focus in policymaking. Price stability is continuing and inflation was 0.9% between December 2001 and May 2002. This is well below the equivalent period last year of 2.9% and shows that the tightening of monetary policy is having the desired effect and that the official target of 8.1% for 2002 is feasible. However, the final average rate of inflation will depend on the effect of the current drought on food prices, which have a heavy weighting in the consumer price index. The exchange rate depreciated by 34% in 2001, mostly during the first half of year, before stabilizing. Much of the depreciation was caused by inflation due to the crisis in the banking sector and by the weakness of the South African Rand (South Africa is one of Mozambique’s main trading partner). The metical held steady in the final quarter of the year. Healthy foreign reserves and tight monetary policy should underpin the metical in 2002-03. The World Bank has approved a US$60m loan for higher education. The Africa Development Bank has also granted Mozambique debt relief, and the UK and Italian governments have cancelled Mozambique’s debt to them. The effects of the floods will take some time to heal. Apart from the social disaster, substantial basic infrastructure (roads, electricity, communication and water) has been destroyed, some areas will have to be cleared for landmines again and much agricultural land has been flooded. There is need for additional assistance in all of these sectors. There is a danger that the much published emergency assistance is merely a budget reallocation, both within Mozambique and within budgets for Southern African countries. The main support and investment are related to filling the backlog of infrastructure, which is also why aid flows are very substantial. There is over-emphasis on trunk roads. Tourism is booming from a low level and there is substantial potential in agriculture, both subsistence and commercial farming. The floods did not significantly negatively affect the luxury resorts. The current drought affected only parts of the country. Political situation and tripartism The victory of the ruling FRELIMO in the December 1999 national elections will ensure continuity with economic and social policy and the results have strengthened the position of the president, Joaquim Alberto Chissano. The political division of the country will continue, with RENAMO maintaining strongholds in the centre and north. The election result will restore economic confidence but demands for economic nationalism and local business empowerment are expected to grow. The elections, which were held on December 3rd –5th 1999, confirmed that FRELIMO is popular in the south while RENAMO is popular in the central and northern areas of the country, although both have made inroads in each other’s respective strongholds. The elections were pronounced free and fair by international observers. A tough election campaign was mounted and FRELIMO spared no effort in ensuring its victory. RENAMO's election campaign was hindered by serious organisational and logistical weaknesses, including a lack of money. The election platforms of both parties reflected consensus on economic and social policy. A human rights report has highlighted continuing paralysis in the administration of justice. The ruling party, FRELIMO has widened its power base as the main opposition party, RENAMO is getting increasingly hampered by a weak party structure outside the major towns and its rural strongholds. Furthermore there are few genuine political differences to FRELIMO. There are more opposition parties, but all fragmented and inexperienced in operating in a multi-party set-up. FRELIMO chose Armando Guebuza as its candidate in the next presidential elections in 2004. Mr. Guebuza’s decisiveness and the cohesion that he will bring to government are likely to promote more effective policy implementation. Apart from minor episodes stability prevails. The main challenge is to develop a genuine opposition to work with the present hegemonic power, FRELIMO. The social partners too are inexperienced in operating in the new framework. OTM, the umbrella of the unions, still has not adjusted to the market-led macro-economic framework. The employers on their side are equally used to a system where unions are socialist inspired organisations and not constructive partners in a free labour market. In any case it is crucial to remember that the formal labour market only covers 10-15% of the total labour force, and of this fraction, only relatively few are unionised. Social situation Although poverty continues to be the widespread in Mozambique there have only been very fragmented signs of social unrest. The impressive growth rates have not trickled down very quickly, but merely the concept of peace has been sufficient to maintain stability. Furthermore there is vast potential for improving livelihoods for a large share of the population as more land is cleared and infrastructure improves. However, as mentioned above, there is still a huge backlog of insufficient infrastructure including roads, bridges, feeder roads, footpaths and sanitary infrastructure. International Labour Standards: Mozambique has ratified five of the eight core Conventions (Conventions no. 87, 98, 100, 105 and 111). ILO/SAMAT will actively assist in the ratification of the remaining three core Conventions, with special focus on Conventions 138 and 182 on Child Labour. Conventions ratified by Mozambique ILO Technical Cooperation:
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