40352 CONFIDENTIAL INTERNATIONAL MONETARY FUND AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION REPUBLIC OF MOZAMBIQUE Completion Point Docurnent for the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Prepared by the Staffs of the International Monetary Fund and the International Development Association September 6, 2001 Contents Page I. Introduction ......................................................... 3 II. Assessment of Requirements for Reaching the Completion Point ....................................... 4 A. Poverty Reduction Strategy Paper ......................................................... 4 B. Economic Program ........................................................ 6 C. Key Policy Measures and Reforms ....................... .................................. 7 Social development ........................................................ 7 Public sector reforms ........................................................ 11 Legal and regulatory reform ....................................................... 14 III. Delivery of Debt Relief and Debt Sustainability over the Medium Term ............ ............ 15 A. Status of Creditor Participation .................. ...................................... 16 Multilateral creditors ....................................................... 16 Bilateral and commercial creditors ........................................................ 19 B. Data Reconciliation and Assistance ......................... .............................. 19 C. Updated Debt Sustainability Analysis ....................................................... 20 D. Comparison of Revised DSA with the DSA as of the Decision Point ................... 24 E. Sensitivity Analysis ........................................................ 26 Scenario 1: lower growth ................ ....................................... 26 Scenario 2: lower grants and more foreign borrowing .................................... 27 IV. Conclusions ........................................................ 27 V. Issues for Discussion ........................................................ 29 'Approved by Callisto E. Madavo and John Page (IDA), and Jiirgen Reitmaier and Michael Hadjimichael (IMF). -2 - Boxes 1. Key Policy Measures for the Completion Point ......................................................... 5 2. Debt Relief and Priority Spending, 1999-2000 ......................................................... 11 3. Macroeconomic Assumption Underlying the Debt Sustainability Analysis ............... 21 4. Implications of Large, Foreign-financed Investment Projects in Mozambique .......... 23 Tables 1. Progress in Implementation of the Health Sector Recovery Program, 1998-2000. 8 2. Progress in Implementation of the Education Sector Strategic Program, 1995-2000 ....................................................... 9 3. Current Planned and Actual Expenditures in the Social Sectors, 1998-2000 ............ 10 4. Comparison of Discount Rate and Exchange Rate Assumptions at End-1998 and End-2000 ................................................. 30 5. Status of Creditor Participation Under the Original HIIPC Initiative .......................... 31 6. Status of Creditor Participation Under the Enhanced HIPC Initiative ........................ 32 7. Estimated Assistance at Enhanced Decision Point ................................................. 33 8. Delivery of IDA Assistance Under the Original and Enhanced HIPC Initiative 1999-2035 ....................................... 34 9. Delivery of IMF Assistance Under the HIPC Initiative ....................................... 35 10. Paris Club Creditors Delivery of Debt Relief Under Bilateral Initiatives Beyond the HIPC Initiative ......................................................... 36 11. External Public and Publicly Guaranteed Debt, end-December 1998 (Revised) ....... 37 12 Medium-Term Balance of Payments, 1999-2020 ....................................................... 38 13. Selected Economic and Financial Indicators, 1998-2001 .......................................... 39 14. Nominal and Net Present Value of External Debt Outstanding at End-2000 ............. 40 15. Net Present Value of External Debt, 2000-20 ......................................................... 41 16. External Debt Indicators, 2001-20 ......................................................... 42 17. External Debt Service After Full Implementation of Debt-Relief Mechanisms, 2001-20 .43 18. Comparison of Net Present Value of External Public Debt at Decision Point and Completion Point .................... 44 19. Sensitivity Analysis, 2000-20 ................................................. .............. ... 45 20. HIPC Initiative: Status of Country Cases Considered Under the Initiative, August 2001 .46 Figure 1. Sensitivity Analysis, 2001-20 .47 Annex: Debt Management .48 - 3- I. INTRODUCTION 1. In April 2000, the Executive Boards of IDA and the IMF agreed that Mozambique had met the requirements for a decision point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative). The debt relief agreed was US$254 million in net present value terms (NPV), calculated to bring the NPV of debt to the equivalent of 150 percent of exports as of 1998. This agreed relief was in addition to the US$1,716 million NPV relief provided under the original HIPC Initiative when Mozambique reached its completion point in June 1999. The total relief for Mozambique under the original and enhanced initiatives of US$1,970 million represents a reduction of 72 percent of the NPV of debt at end-1998. The Boards also agreed in April 2000 that interim period debt relief would be provided to Mozambique by IDA and the :MF equivalent to 100 percent of the debt service due over the following year, in view of the exceptional conditions resulting from the floods that hit Mozambique in early 2000. Paris Club creditors took similar action. 2. This paper recommencls that additional assistance of US$53 million in NPV terms (10 percent of exports) be provided in the light of revisions that have been made to the debt data as of the decision point. This paper also recommends that the Boards approve the completion point for Mozambique under the enhanced HIPC Initiative. The Boards had agreed that this completion point should be reached on the basis of (i) satisfactory performance under the program supported by the IMF's Poverty Reduction and Growth Facility (PRGF); (ii) completion of a poverty reduction strategy paper (PRSP), endorsed by the Boards of the IDA and the IMF as a context for concessional assistance; and (iii) satisfactory progress in implementing the social and structural reforms monitored under the Initiative and outlined at the decision point. With respect to these conditions, the IMF Executive Board will consider the completion of the third review under the PRGF arrangement along with this paper; Mozambique has prepared a PRSP, which, along with the Joint Staff Assessment (JSA), will be considered by the Boards at the same time as this document; and, as discussed in this paper, Mozambique's progress in implementing the reforms specified for reaching the completion point has been satisfactory. 3. The paper is organized as follows. Section II assesses Mozambique's performance in meeting the requirements for reaching the completion point, as set out in the decision point documents. It includes a discussion of the impact of debt relief on expenditures during the interim period. Section III reviews the status of creditor participation, discusses the corrections to debt data and the delivery of debt relief to Mozambique under the HIPC Initiative, and presents the results of the debt sustainability analysis, taking into account HIPC Initiative assistance. This assessment includes a review of longer-term debt sustainability issues. Sections IV and V present the conclusions and issues for discussion. -4- II. ASSESSMENT OF REQUIREMENTS FOR REACHING THE COMPLETION POINT 4. As set out in the decision point document, the conditions for reaching the completion point include (i) completion of a full PRSP; (ii) continued observance of the PRGF-supported program; and (iii) satisfactory performance on a set of key policy areas, 2 which are summarized in Box 1. In monitoring these conditions, the decision point document indicated that particular attention would be paid to strengthening the tracking of budgetary resources for poverty reduction, to developing strategies and budgetary allocations in the health and education sectors, the national HIV/AIDS strategy, and progress on a set of key social indicators. It was also noted that due regard would be paid to the impact of the 2000 floods in making the assessment for the completion point. A. Poverty Reduction Strategy Paper 5. Mozambique's PRSP, officially designated as Action Plan for the Reduction of Absolute Poverty, 2001-05, (or PARPA under its Portuguese acronym), was approved by the Council of Ministers in April 2001. It draws on (i) previous work undertaken for the Interim PRSP (PARPA 2000-04), which was discussed by the Boards of the IDA and the IMF on April 6 and 7, 2001; (ii) inputs from the representatives of civil society, private sector, and donor community through a broad consultative process; and (iii) new analytical work focusing, in particular, on the relationship between poverty reduction and growth, and on the key determinants of the latter. 6. Poverty reduction has been a key objective of the economic reform process in Mozambique for over a decade. The PARPA makes explicit the key role of accelerated and broad-based economic growth as a powerful element in Mozambique's poverty eradication effort and focuses on six priority areas: (i) education; (ii) health; (iii) agriculture and rural development; (iv) basic infrastructure; (v) good governance; and (vi) macroeconomic and financial management. 7. Both PARPA-related measures for the enhanced HIPC Initiative Completion point were successfully implemented: the completion of regional poverty profiles, of which results were incorporated and clearly articulated in the PARPA; and the completion of the three-year policy matrix and macroeconomic framework underpinning the poverty reduction strategy, which were approved by the Council of Ministers in April 2001, as part of the PARPA. 2 Seedecision point document EBS/00/62 and IDA\R2000-35 (3/30/2000), para. 61, Box 2, and Tables 2-4. -5- Box 1. Key Policy Measures for the Completion Point Measures Status Poverty reduction strategy Completion of regional poverty profiles Done Completion of a reformulated three-year policy matrix, and macroeconomic Done framework underpinning the poverty reduction strategy Social development Development and approval of a new Health Sector Strategic Plan Done Implementation of the National Multisectoral Strategic Plan on HIV/AIDS Ongoing Increase in current health and education expenditures as a share of total current Done expenditure Public sector reform Publication of quarterly budget execution reports, including a sectoral Done classification of expenditures Review of system of tax and customs exemptions Done Development of strategic plan for public sector reform, including a Done functional review of ministries Development of policy regarding remaining public enterprises and Done companies with majority public ownership Legal and regulatory framework Adoption of a strategic plan for the justice system Satisfactory progress Drafting of new commercial code covering company and contract law Done Adoption of regulations for private sector involvement in the telecommuni- Done cations and energy sectors 8. The PARPA is presented as "an instrument for medium-term programming within the public planning system" that will function alongside both medium-term instruments (such as the medium-term expenditure framework (MTEF) and the Tri-Annual Public Investment Program) and short-term instruments (such as the yearly Economic and Social Plan or PES- and the state budget). Overall, as indicated in the JSA, the PARPA contains a sound strategy for poverty reduction in Mozambique identifying policy priorities and the appropriate instruments for their implementation; making good use of inputs provided by key stakeholders during the consultation process; laying out an adequate financing plan, linked to the MTEF; and describing plans for the participation of stake-holders in monitoring implementation. Nevertheless, there are risks to the strategy, as noted in the JSA. In particular, careful -6- monitoring will be needed to ensure, inter alia, that it is adapted if budgetary revenues fall short of expectations or institutional weaknesses impede the implementation of policies needed to sustain growth and poverty reduction. B. Economic Program 9. Performance under the PRGF-supported program has been satisfactory. At the time of the decision point, in April 2000, it was feared that serious flooding would be a major setback to social and economic progress. Despite tragic flood-induced destruction and loss of life, the economy grew by 2.1 percent in real terms in 2000 reflecting aid-financed reconstruction, new foreign direct investment, and the start of production at a new state-of-the-art aluminum smelter. These same forces have continued to drive the economy, and a return to near double- digit growth is expected during 2001. 10. The government's primary deficit in 2000 (6.5 percent of GDP) was smaller than programmed due to lower than expected expenditures stemming from lack of capacity to implement the capital budget in full and step up social spending during the year. In the aftermath of the floods, shortages of basic goods and an accommodating monetary policy brought inflation to 11.4 percent at the end of 2000. Consumer prices stabilized in the latter part of 2000, but new inflationary pressures developed in mid-2001 and, in July 2001, the 12-month rate of inflation rose to 7 percent. The external current account deficit (after grants) narrowed from 18 percent of GDP in 1999 to 12 percent in 2000, as exceptionally high imports for flood relief were more than offset by higher net exports from large aluminum and electricity projects. The central bank has continued to steadily accumulate foreign reserves, which, at end-June 2001, stood at the equivalent of 6 months of imports of goods and services. 11. All quantitative performance criteria were met for the PRGF-supported program at end- December 2000, although the higher than expected buildup of net international reserves led to an expansion in reserve money in excess of the corresponding benchmark. This pattern was repeated at end-June 2001, with the observance of all quantitative performance criteria, but with a continuation of monetary growth in excess of the program benchmark. In response to renewed pressure on prices and on the exchange rate, the central bank has tightened monetary policy by raising reserve requirements, with effect from July, and increasing interest rates. 12. Implementation of structural reforms under the PRGF-supported program continued, albeit with some setbacks. The major achievements since the decision point were recorded in the areas of (i) tax policy and administration, including completion of a review of tax and customs exemptions, approval of the legal basis for a special section to handle large taxpayers, and preparation of a plan to create a central revenue authority; (ii) fiscal transparency and accountability, including completion and publication of a review of transparency of fiscal management in relation to the Code of Good Practices on Fiscal Transparency, the initiation of publication of quarterly budget execution reports including, in 2001, poverty-focused spending, and preparation of a new public financial management law; and (iii) public enterprise reform, including the submission to the Council of Ministers of a policy statement on the future of public enterprises and companies with majority state ownership. -7- 13. Recapitalization of two large commercial banks, both with minority government shareholdings, was partly accomplished in the case of one, Banco Comercial de Mogambique (BCM). However, rather than provide additional capital to bring the bank into compliance with prudential requirements, the private shareholder of the other bank, Banco Austral (BA), decided instead to sell its majority holding to the government for a nominal amount. In view of the need to resolve the BA issue and the implications of this operation for public finances and the soundness of the financial system, the staffs of the Bank and the Fund worked closely with the government to find a way forward to address these issues while minimizing the delay in completing the third review under the PRGF. With the assistance of an international consulting firm, BA was put up for sale in May 2001 and at end-July two bids were received. The government has entered into negotiations for the sale. Safeguards have been put in place to minimize losses before a sale is concluded and the government has stressed its commitment to an effective and transparent process to recover BA's nonperforming loans. 14. In June 2001, agreement was reached with the Fund staff on the program through end-2001, including the resolution of BA. The program aims to ensure macroeconomic stability with inflation at end-year held to 7 percent. In support of this objective, the domestic primary balance, net of the costs of bank restructuring, is to be held to 6.2 percent of GDP as originally programmed and the rate of monetary growth is to be brought down to 19 percent by end year. The major structural measure envisaged is the introduction of a comprehensive reform of income taxes that will simplify tax administration procedures and broaden the revenue base. The law is expected to be in place by end-2001, so as to achieve the envisaged revenue gains as early as possible. Other reforms expected in 2001 include enhanced banking supervision procedures and a tightening of regulations on connected lending in the banking system. In line with program objectives, the government is working closely with donors on fully executing social expenditures in the 2001 budget and on reinforcing social expenditure appropriations in the 2002 buclget. C. Key Policy Measures and Reforms 15. The status of implementation of the key policy measures to be monitored for the HIPC Initiative completion point is summarized in Box 1 and assessed below. Social development Health sector 16. A major focus of the government in the health sector has been to develop a Health Sector Strategic Plan for 2001-04. This effort, which included extensive consultation with stakeholders, led to the approval in May 2001 by the Council of Ministers of a plan,3 which will be discussed further, with the provinces and the donor community. The plan establishes sectoral policies and programs within a policy framework for the development of a sector-wide 3Ministerio de Saude, 2001, PIlano Estrategicodo Sector Saade (PESS) 2001-05. - 8- approach in which the government and the donors will work together on joint procedures for budgetary support to the sector. 17. The delivery of health services has continued to improve, as have key indicators in the sector (Table 1). Two of the four targets 4 set out in the decision point document were achieved by wide margins: (i) DPT (diphtheria, pertussis and tetanus) coverage was raised from 77 percent to 92 percent in 2000, compared with the target of 80 percent; and (ii) the proportion of health posts staffed with trained personnel was raised from 86 percent to 93 percent in 2000, compared with the target of 90 percent. A third objective, raising by two percentage points the proportion of health posts/centers stocked with Essential Drugs Program kits, was also achieved. The government has indicated that future improvement in this indicator will require special efforts to target drug kit availability in lagging provinces, and is undertaking such efforts. The fourth key indicator, the index of geographic inequality (the ratio of resources going to the most-and least-favored geographical units) was brought down from 3.6 in 1998 to 3.5 in 1999 and 2.9 in 2000. Improvement in this indicator reflects the higher weighting to the poorer districts in the allocation formula used by the Ministry of Health for recurrent costs, as well as the extension of the health system in rural areas. Table 1. Mozambique: Progress in the Implementation of the Health Sector Recovery Program, 1998-2000 Indicators 1998 Goal for HIPC Actually Achieved Completion Point as of 2000 Vaccination coverage with DPT third dose 77 percent 80 percent 92 percent Index of geographic inequality 3.6 I Reduce by 0.2 ' 2.9 Proportion of health posts/centers stocked 84 percent 2 Increase by 86 percent with essential drugs program kits 2 percent 2 Proportion of health posts/centers staffed 86 percent 90 percent 93 percent with trained personnel Sources: Health Sector Strategic Plan (p. 17), unless otherwise mentioned. Index of geographic inequality: WHO. "Originally reported in the decision point document as 3.0 (estimated), with the objective of reducing it to below 2.8. Data revisions indicated that the actual outcomes were 3.6 in 1998 and 3.5 in 1999. 21 Reported in the HIPC decision point document as 88 percent (estimated based on WHO survey) in 1998 (with a target 2 percentage point improvement for 2000, i.e. 90 percent). Actual data for 1998 show coverage as 84 percent, implying a targe- of 86 percent. Education sector 18. The government has continued to implement its US$717 million Education Sector Strategic Program (ESSP), launched in 1998 and supported by IDA and other donors. The program gives priority to increased and equitable access to higher quality basic education and focuses on the following objectives: (i) improving the quality of education by increasing enrollment in preservice teacher training institutions, upgrading underqualified teachers, and 4 As noted in Table 1, the targets have been adjusted to reflect data revisions in the 1998 base year. -9 - enhancing pedagogical supporlt and the supply of materials; (ii) expanding access to education by building and rehabilitating classrooms, boosting internal efficiency, and launching a number of initiatives to support girls' enrollment; and (iii) reinforcing the institutional capacity for financial management, planning, policy development, as well as monitoring and evaluation. In addition, the ESSP supports the development of strategies for technical and vocational training as well as tertiary education, in order to promote a broad-based development of human capital that will contribute to sustained economic growth. 19. The ESSP targeted improvements of 1-2 percentage points per year in the gross enrollment rate and in the proportion of students passing key examinations, as well as a 1-2 percentage point reduction in the average repetition rate in primary and lower secondary schools per year; these targets were reflected in the decision point document. Recent data (Table 2) indicate that these objectives are being met. In particular, the transition rates at various key nodes, e.g. from lower EPI to higher EP1 (grade 5 to grade 6), and from grade 7 to grade 8, rose between 1998 and 2000. However, continuing high repetition rates, particularly in primary schools, remain a cause for concern. Table 2. Mozambique: Progress in Implementation of the Education Sector Strategic Program, 1995-2000 1995 1996 1997 1998 1999 2000 Gross admission rate (grade 1) 57 62 67 70 85 113 Gross enrollment rate (EP1 grades 1-5) 57 69 75 78 84 91 Gross enrollment rate (EP1 grades 6-7) 14 18 19 20 21 24 Transition rate (grade 5 to grade 6) 55 61 62 63 79 80 Transition rate (grade 7 to grade 8, viz., EPl to EP2) 34 39 45 51 69 64 Repetition rate (primary schools) 26 25 25 25 25 23 Repetition rate (lower secondary schools) 30 28 28 28 27 23 Sources: Grade I admrission rate (previously termed "enrollment rate") and repetition rates, 1995-1998: HIPC decision point document, Table 3, in turn from the Miniistry of Education; 1999-2000: the Ministry of Education. Transition rates, 1995-2000: Ministry of Education. 20. The government has prepared strategies for technical, vocational and tertiary education to address acute skill shortages. A new ministry for tertiary education was created in 2000 and the strategy for expanding access to tertiary education is being implemented with assistance from a World Bank-funded Higher Education Project. The response to HIV/AIDS 21. The government has strengthened its response to the HIV/AIDS pandemic by implementing its National Strategic Plan for Fighting STDs/HIV/AIDS. Nationally about 16 percent of adults carry the virus, but in some regions, particularly in the transport corridors, the infection rate may exceed 20 percent. The strategic plan was launched in September 1999 and has been followed up by the establishment of a National Council on HIV/AIDS with an executive secretariat. In November 2000, a donor conference was held to fund the plan, and - 10- pledges of US$100 million were made to cover three years. In several ministries special AIDS units have been set up, including a unit in the Roads Authority that works on HIV/AIDS prevention measures. The Ministry of Education has drafted a strategy on HIV/AIDS prevention, to reach all primary and secondary school students and teachers. These ministerial efforts are being coordinated through mechanisms set up by the HIV/AIDS executive secretariat. The government is also carrying out sectoral impact studies and an analysis of the impact of AIDS on economic growth. Expenditures 22. In the context of HIPC Initiative debt relief, the Government undertook to increase its current spending on education and health. As shown in Table 3, the Government's budgeted and actual spending rose, as a share of total spending, in both education and health. Current spending on education rose from 18.1 percent of total current expenditure in 1998 to 20.6 percent in 1999 and to 23.6 percent in 2000. Current health spending rose from 7.1 percent of the total in 1998 to 9.0 percent in 1999 and to 10.1 percent in 2000. In dollar terms, combined current expenditures on health and education increased by over US$60 million in the two years to 2000, accounting for more than 80 percent of the total increase in current spending over this period. Table 3. Mozambique: Current Planned and Actual Expenditures in the Social Sectors, 1998-2000 (In units indicated) 1998 1999 2000 1998 1999 2000 % of total currentspending, % of total currentspending, budgeted actual Education 16.9 18.9 23.3 18.1 20.6 23.6 Health 7.7 9.9 12.4 7.1 9.0 10.1 Total (health and education) 24.6 28.7 35.7 25.2 29.6 33.7 Memorandum items: Total current spending (Mt bn) 4,651 5,699 8,116 5,268 6,321 7,836 Total current spending (curr. US$ mn) 392 449 535 445 498 516 Current Health and Educ. (US$ mn) 96 129 191 112 147 174 Sources: Budgeted figures for 1998, and 1999: Orfamento do Estado. Budgeted figures for 2000: Ministry do PARPA" (dated July 27, 2001), table of Planning and Finance, "Despesa nas Areas Prioritarias "Orgamento Corrente". Actual spending numbers in the social sectors for 1998: Conta Geral do Estado, 1998, p. 19, quadro J. Actual spending numbers in the social sectors for 1999 and 2000: Ministry of Planning and Finance, ibid. - 11 - 23. The contribution of debt relief to total PARPA priority spending 5 is indicated in Box 2. Domestically financed spending in these areas increased by the equivalent of US$78 million or 2.1 percent of GDP, between 1999 and 2000. Over the same period, actual debt-service payments from the budget declined by the equivalent of US$37 million or 0.9 percent of GDP while HIPC Initiative assistance from the IMF transferred to the budget by the central bank increased by US$32 million, or 0.8 percent of GDP. Thus, the increase in spending in PARPA priority areas in 2000 exceeded the resources made available by the reduction in the combined debt service of the budget and the central bank. Box 2. Debt Relief and Priority Spending, 1999-2000 1999 2000 Difference Domestically financed PARPA expenditures In billions of meticais 3,790 5,654 1,864 In rnillions of U.S. dollars 298 376 78 As a percent of GDP 7.3 9.4 2.1 External debt service paid by the budget In billions of meticais 801 386 -415 In millions of U.S. dollars 63 26 -37 As a percent of GDP 1.5 0.6 -0.9 Transfer to the budget of HIPC assistance from the IMF In billions of meticais 0 485 485 In millions of U.S. dollars 0 32 32 As a percent of GDP 0.0 0.8 0.8 Source: Ministry of Planning and Finance Public sector reforms Strengthening public accounting of poverty-related expenditures 24. The authorities have stepped up their efforts to address the urgent need to improve financial management, and thereby enhance efficiency, transparency and accountability in the public sector. In May 2000, the Government began publishing quarterly budget execution reports, including a sectoral classification of expenditure. These were enhanced in May 2001 to include a detailed breakdown of poverty related expenditures, including those financed by debt relief. 5 The PARPA defines priority areas in health and education, infrastructure developrnent, agriculture and rural development, and governance. In 2000 health and education accounted for 55 percent of domestically financed PARPA spending. - 12- 25. In 2000, the government initiated a public expenditure review (PER) and a Country Financial Accountability Assessment (CFAA), which will define an action plan for further reform of the budget and financial management system. While the PER is focused on issues related to budget planning, execution and reporting, the CFAA is focused on public accounting and auditing. This work is already producing results. For example, it helped the government in revising the budget classification system, which, starting with the 2002 budget, will allow greater transparency and control, in particular as regards social expenditures. 26. The government is designing a new law on public financial management, which it intends to submit to parliament.in 2001. Moreover, a Country Procurement Assessment Review (CPAR) is also planned to be launched in 2001. In addition, the IMF has completed a Report on Observance of Standards and Codes (ROSC) on fiscal transparency that has been published with the authorities' agreement. 27. Finally, the government plans to pursue its goal of expanding budget coverage to all donor contributions and ministerial "own funds." The investment account in the budget execution reports is understated because many donor disbursements, particularly those to regional govemments, are not recorded in the accounting system. Plans are in hand to incorporate all the information on these flows from the largest seven donors in the 2002 budget and the subsequent budget execution reports. The government is also developing measures to ensure that all unreported ministerial "own funds" and their spending counterpart are managed, spent and accounted for. Reforn of tax and tax administration 28. Reform of the tax system and its administration began with the introduction of a new Customs Code with fewer and lower rates and exemptions (1996), the contracting of an international company to manage customs (1997), and the computerization of several customs posts. In 1999, the government replaced the cumbersome and evasion-prone system of indirect taxes with a value-added tax (VAT). This was followed by a review of the system of tax and customs exemptions and in May 2001 the drafting of new code of fiscal incentives setting comprehensive and transparent guidelines on exemptions and other benefits for domestic and foreign investors. 29. The next major objective of tax reform is an overhaul of the country's personal and corporate income tax system, which is envisaged under the government's program for 2001-02. With technical assistance from the Fund and a bilateral donor, the authorities are drafting a new income tax law for submission to the National Assembly by end-December 2001. The main thrust of this reform will be to simplify income tax administration and expand the revenue base by unifying the multiple existing taxes into single personal and corporate income taxes and simplifying computation and payment procedures, such as tax withholding at source, self-assessment, and self-liquidation. The administrative gains from simplification of the income tax law are expected to be enhanced by the creation of a central revenue authority and the establishment of a special unit to handle large taxpayers in Maputo. - 13 - Reform of public sector administration 30. Among the key policy measures for the completion point was the government development of a strategic plan for public sector reform, including a functional review of ministries. The strategic plan was developed over a two-year period by an especially created unit (UTRESP) that reports to the Prime Minister. UTRESP's reform program was discussed with permanent secretaries and national directors, and the final plan was approved by the Council of Ministers in May 2001, and was announced publicly by the President in June. Funding has been promised by several of the donors. 31. The first, three-year phase of the plan would establish the basic conditions for reform by rationalizing and decentralizing public service delivery. This will include revising the system of incentives so as to motivate public servants, including a medium term pay strategy. The implementation strategy will focus on the link between policy and resources, drawing on the medium-term expenditure framework (MTEF) and the PARPA. It will include measures to further improve allocation and accountability, notably by introducing an Integrated Management Information System on a pilot basis and by making e-mail available throughout the public service. Full implenmentation of the management information system throughout the public sector will be accomplished in the second phase. 32. Meanwhile other reforms have been under way. Work has started on the actuarial analyses of the pension scheme of the public sector and the National Social Security Institute. The Prime Minister made a major speech on anticorruption in May 2001. Other reforms adopted under a "quick wins" program include facilitation of the issuance of visas so as to encourage tourism (a reduction in fees and elimination of visa requirements for certain nationals), and the establishment of a "one-stop shop" for company registration in the Ministry of Commerce and Industry. Public enterprisepolicy 33. The government has followed up the completion of the first phase of its privatization program with a new policy regarding the remaining public enterprises and companies with majority public ownership, which was approved by the Council of Ministers in May 2001. The principles embodied in the policy are to promote private sector provision of public goods and services, as well as basic infrastructure, while maintaining the state's role in supervision, regulation and inspection. According to the policy, there will be three categories of firms. The first category comprises seven enterprises 6 providing basic services that will remain in state hands, even though in certain cases the service involved may be provided by a concessionaire. In the second category, the state will continue to retain minority shares in firms that provide 6 The seven companies to remain under state ownership are: the national railways and airports (infrastructures management, concessioning), the public television and radio channels, the fuel distribution company (ENH), and two urban transport companies. - 14 - basic services or have "strategic importance." 7 The third category comprises 122 firms where government holdings (varying from 1 percent to 100 percent) are to be sold outright. Legal and regulatory reform Reform of the justice system 34. The need for reform of the justice system has taken on greater visibility over the past year. Political violence in the latter half of 2000 highlighted the weakness of law enforcement and of the court system. In particular, the tardiness of the Judicial system-stemming from antiquated law, deficient capacity and corruption-is exemplified by the backlog of cases at the Supreme Court that rose from 130,000 at the end of 1999 to 142,000 at the end of 2000. This state of affairs is increasingly an obstacle to new business enterprise, inter alia because it hampers the ability of banks to use collateral in order to extend loans to new clients. 35. In response to this situation, the government has begun a process of comprehensive judicial reform. At the time of the decision point, a strategic plan for the sector was expected to have been completed in 2000. The nature of this plan has since been clarified to encompass not just the Ministry of Justice but also the independent judiciary and the Attorney General, and its scope has been broadened with the participation of key stakeholders. The plan is now expected to be finalized by the end of 2001 and the Government has drawn up detailed terms of reference for this task. These include (a) a policy statement on law reform in general which inter alia anticipates the formation of intermediate courts to lighten the burden on the Supreme Court; (b) overall terms of reference for the strategic plan for all justice-related institutions including the Ministry itself, and separate terms of reference for each of the components: Supreme Court, Administrative Tribunal and the Attorney General; (c) a commitment to consult various civil society institutions, including the lawyers' association, the private sector and non-governmental organizations active in the area. In respect of the Administrative Tribunal, the plan will provide for strengthening of its role in the "contencioso administrativo", viz. the ability of citizens to appeal to the Tribunal against actions of government. Support for the development of the strategic plan is being provided by a bilateral donor and background studies for the plan have been completed. 36. In the meantime, progress has been made in defining the future orientation of the Ministry of Justice, a necessary step towards the preparation of the strategic plan for the justice system. After completing several studies, the Ministry of Justice issued a policy statement on the future role and functions of the ministry, entitled Politicada Defesa da Legalidade e Organiza9&oda Justiga (April 2001). The Ministry of Justice has started to implement measures to strengthen itself and the related agencies. 7 These include the post office, the electrical utility, the national airline, and the telecommunications company. - 15 - 37. In addition, several reform initiatives are under way. New legislation that has been prepared includes (i) a new commercial code, updating that of 1896; (ii) a new civil code; (iii) a penal code; and (iv) a money laundering law. The commercial code is now undergoing a process of public review. These draft laws are expected to be submitted to parliament in 2001. Regulations will be issued to support the 1999 law on arbitration, conciliation and mediation. New courts are planned to be opened in 2001, including at least one community court in each province and five labor courts. The framework for broader legal reform is being developed though the establishment of a Commission on Law Reform to bring together the various arms of government involved in law, as well as civil society and the universities. 38. In sum, the government is on track to complete the strategic plan for the sector by the end of the year, and has in the meantime made progress in implementing a number of reform measures in the sector that, taken together, the staff believes are adequate to constitute observance of the undertakings at the decision point. However as the government recognizes, in relation to the overall need for reform in the sector, the process is still at an early stage. Regulatory reform 39. The Government undertook in March 2000 to adopt regulations for private sector involvement in the energy ancl telecommunications sectors. In the energy sector, a decree of April 2000 laid out the regulatory framework for granting concessions (competitive bidding) and setting tariffs, and permitted differential regulatory treatment for small systems. A national "energy strategy" was issued in October 2000 that incorporated the policy targets of (i) "unbundling" main grid tariffs; (ii) cost-based, regionally differentiated tariffs for the main grid; and (iii) explicit, transparent cross-subsidies. 40. In the telecommunications sector, significant progress is being made. A new telecommunications law was passed in 1999. On the advice of World Bank staff, the government took additional time to revisit the legal and regulatory framework, rather than issue regulations on the basis of the 1999 law, so as to arrive at a high-quality set of regulations well adapted to modern conditions. As a result, the government has developed a forward- looking sector policy document, which is now in draft and will be published in September 2001. An amendment to the telecommunications law will be submitted to the National Assembly in September, eliminating the monopoly on long-distance calls held by the incumbent Telecomunicac,es de Mogambique (TDM) and thus facilitating the entry of private operators. A new telecommunications law will be submitted to parliament by March 2002. This legislative effort is part of a far-reaching reform of the sector now under way that will include the issuance of two new mobile licenses (for which the tender documents will be released in September 2001) and the privatization of TDM by December 2002. HI. DELIVERY OF DEBT RELIEF AND DEBT SUSTAINABILITY OVER THE MEDIUM TERM 41. This debt sustainability analysis was prepared jointly by the Fund and IDA staffs and the Mozambican authorities on the basis of loan-by-loan data provided by the authorities for - 16 - debt outstanding at end-2000. The nominal debt data have been reconciled with creditor statements from all multilateral creditors and the Paris Club creditors, as well as most of Mozambique's non-Paris Club official bilateral and commercial creditors. The exchange rate and interest rates used for the calculation of the debt are presented in Table 4. A. Status of Creditor Participation 42. Mozambique began benefiting from debt relief under the HIPC Initiative following the completion point under the original HIPC Initiative, which was reached in June 1999 (Table 5). All of Mozambique's multilateral creditors, except the OPEC Fund, have concluded debt relief agreements; the OPEC Fund has proposed a single operation that would provide debt relief as required under the original and enhanced HIPC Initiatives (Table 6). The Paris Club agreed in July 1999 to provide relief to Mozambique under the original HIPC Initiative. Furthermore, the Paris Club has granted Mozambique exceptional debt relief in the wake of the floods in early 2000, deferring all payments to the Paris Club creditors until the earlier of June 2001 or the enhanced HIPC Initiative completion point. 8 Among non-Paris Club creditors, South Africa has forgiven all official loans and Algeria granted a rescheduling comparable to the Lyons terms (80 percent NPV reduction) applied by the Paris Club in 1998. Multilateral creditors 43. The HIPC Initiative assistance required from the multilateral creditors amounts to US$641 million in NPV terms under the original framework and US$95 million in NPV terms under the enhanced framework, as agreed at the decision point (Table 7). Among multilateral creditors, debt relief under the original HIPC Initiative was fully implemented by IDA, African Development Bank (AfDB), IMF, European Union, International Fund for Agricultural Development (IFAD), and the Nordic Development Fund (NDF), while the Arab Bank for Economic Development in Africa (BADEA) has delivered a substantial portion of the relief due. BADEA has indicated that the residual amount of debt relief under the original HIPC Initiative would be delivered together with the debt relief due under the enhanced HIPC Initiative. 44. Mozambique also began benefiting from interim debt relief after it qualified for additional assistance under the enhanced HIPC Initiative in April 2000. IDA and the IMF granted an interim debt-service reduction, including a complete forgiveness of debt service for the first year in light of the unexpected financing needs for post-flood rehabilitation activities. In early 2001, AfDB granted a debt-service reduction of about 80 percent, applicable retroactively to April 2000. Other multilateral creditors have indicated their commitment to provide the required debt relief under the enhanced HIPC Initiative as soon as Mozambique successfully reaches the completion point. 8This deferral was subsequently extended to end-December 2001 or the Completion Point under the enhanced HIPC Initiative whichever came sooner. - 17 - Corrected: 9/19/01 45. IDA assistance. Original HIPC Initiative assistance amounted to US$381 million in NPV terms. It was in part delivered during the first interim period (1998-99) by providing a grant in lieu of an IDA credit of US$154 million, an operation that provided an effective debt relief of about US$54 million in NPV terms. The remaining US$327 million was delivered after Mozambique reached its first completion point, using resources from the HIPC Trust Fund to purchase and cancel eight IDA credits at their net present value price, equivalent to a face value of about US$684 million. The enhanced HIPC Initiative assistance from IDA is being delivered through a 100 percent debt-service reduction in the first year and ongoing debt- service relief thereafter. Debt-service relief from IDA under the enhanced HIPC Initiative, which will become irrevocable when Mozambique reaches the completion point, will provide a cumulative debt service reduction of US$67 million through 2009. Direct debt-service savings for Mozambique from the original and enhanced HIPC Initiative will amount to US$875 million (including the revisions recommended in paragraph 57). Including the effect of the conversion of an IDA credit of US$154 million into a grant, the total savings to Mozambique amounts to US$1,055 million (Table 8).9 46. Assistance from the Fund under the original HIPC Initiative amounted to US$125 million in NPV terms and took the form of a grant from the PRGF/HIPC Trust deposited into an escrow account at the initial completion point in 1999. This amount, plus accrued interest, is being used to cover part of Mozambique's debt service to the Fund under an agreed schedule. The enhanced HIPC Initiative assistance from the Fund amounts to US$18.5 million, and is being delivered through the PRGF HIPC Trust in conjunction with the original HIPC Initiative assistance. In response to the exceptional financing needs in 2000 as a result of the floods, the IMF's assistance was front-loaded with 35 percent of total assistance under both the original and enhanced initiatives being delivered between 2000 and 2001. It is expected that the average savings from this assistance would amount to about 77 percent of the debt service due on obligations to the IMF between 2000 and 2009 (Table 9). 47. African Development Bank Group (AfDB). At the end of 1999, AfDB cancelled 21 loans, including all outstanding nonconcessional loans, worth US$119 million in NPV terms to deliver the debt relief due under the original HIPC assistance. Under the enhanced HIPC Initiative framework, AfDB is providing interim relief backdated to the April 2000 decision point, yielding a debt service reduction of about 80 percent. The interim assistance would be followed by a commitment at the completion point to provide a further debt service reduction of 80 percent until the beginning of 2009. Combined with the assistance under the original HIPC Initiative assistance, the cumulative savings on debt service to the AfDB would amount to US$260 million until 2042, averaging about US$6 million annually. 48. The European Union is delivering its HIPC Initiative assistance through direct debt reduction worth US$23.8 million. The assistance under the original HIPC Initiative framework 9 The savings include the interest that would have been payable had the grant of US$154 million been provided as a credit. - 18 - (US$20.6 million in NPV terms) is being delivered through the full cancellation of five loans and partial reduction of one risk capital loan. At the completion point, the enhanced HIPC Initiative assistance would enable partial cancellation of more debt equivalent to US$3.2 million in NPV terms. 49. IFAD and NDF are using front-loaded, 100 percent relief of debt service due to provide their assistance under the original HIPC Initiative equivalent to US$12.6 million and US$2.4 million in NPV terms respectively. IFAD's assistance is administered through its own HIPC Trust Fund, which pays the debt service on behalf of Mozambique as it falls due until the Trust Fund resources for Mozambique are exhausted. NDF provides debt-service reduction in the same manner, but operates through the HIPC Trust Fund administered by the World Bank. Both IFAD and NDF have committed themselves to providing additional enhanced HIPC Initiative assistance at the completion point equivalent to US$1.9 million and US$0.4 million in NPV terms respectively. It is estimated that the debt-service reduction under both HIPC Initiative frameworks could be provided by IFAD and NDF until about 2012, with the cumulative debt-service savings amounting to US$17 rnillion and US$4.5 million, respectively. 50. In 1999, BADEA delivered debt relief worth US$8.1 million in NPV terms, committed at the original decision point, and intends to combine the residual assistance from the original HIPC Initiative framework with the delivery of the enhanced HIPC Initiative assistance. The remaining HIPC Initiative assistance at the completion point, thus amounting to US$2.8 million, is assumed to be delivered through a further reduction in debt service. The cumulative assistance under the original and enhanced HIPC Initiative frameworks is expected to be US$19 million. 51. The Mozambican authorities are discussing with the OPEC Fund a revision of its original proposal, so as to consolidate assistance due under the enhanced HIPC Initiative. Assistance committed at the original decision point would have provided relief of about US$6.8 million in NPV terms; together with topping up committed at the completion point, this yields a required total under the original HIPC Initiative framework of US$7.7 million. A revised proposal would be expected to provide this NPV reduction of US$7.7 million under the original HIPC Initiative framework and a further US$1.2 million under the enhanced HIPC Initiative framework. 52. The Islamic Development Bank did not have any exposure to Mozambique at end- 1998, the DSA reference year, and thus is not required to provide assistance to Mozambique under the HIPC Initiative.10 10 The outstanding debt to Islamic Development Bank at end-2000 amounted to US$3.7 million (US$1.9 million in NPV terms) stemming from disbursements made during 1999-2000. - 19- Bilateral and commercial creditors 53. The Paris Club decided in July 1999 to grant Mozambique the full relief due under the original HIPC Initiative, consisting of a stock-of-debt operation with a 90 percent NPV reduction of eligible debt. In March 2000, the Paris Club creditors decided to provide exceptional relief as a response to the flood emergency, by providing a 100 percent debt- service deferral during the interim period under the enhanced HIPC Initiative, while also reaffirming their intention to provide a stock-of-debt operation at the completion point. This stock-of-debt operation, in conjunction with the assistance provided during the interim period, would deliver combined assistance under both HIPC Initiative frameworks worth US$962 million in NPV terms. The 100 percent deferral, granted initially for 15 months, has recently been extended until December 2001. A number of Paris Club creditors indicated that they would provide debt relief beyond that required under the terms of the HIPC Initiative (Table 10). 54. The Mozambican authorities solicited the participation of non-Paris Club ofFicial creditors in writing after Mozambique reached the completion point under the original HIPC Initiative, and again after the second decision point in 2000. Several creditors have responded positively, including South Africa, which cancelled all its public sector loans to Mozambique worth US$9 million. Mozambique also signed a bilateral agreement with Algeria on terms comparable to the Paris Club Lyons terms (80 percent NPV reduction). However, the authorities have suspended the implementation of this agreement, pending negotiations to secure a higher NPV reduction as required under the enhanced HIPC Initiative. Currently, the Fund for Arab Economic Development and Poland have indicated their intention to engage the Mozambican Government in negotiations for the delivery of HIPC Initiative assistance. However, despite their best efforts, the authorities have not been able to conclude satisfactory agreements with the other non-Paris Club bilateral creditors on comparable terms.11 55. The authorities are also exploring a possible use of the IDA Debt and Debt Reduction Facility to buy back and retire commercial debt that is in arrears and was not treated under Mozambique's first buyback of commercial debt in 1991. The IDA buyback, if approved, would aim to secure for Mozambique debt-reduction terms at least comparable to those required under the HIPC Initiative. B. Data Reconciliation and Assistance 56. As part of the process of preparing the debt sustainability analysis, the staffs and the authorities solicited new creditor debt statements and reviewed the calculations of net present l Actual debt-service payments to these creditors have been minimal pending agreements on debt relief. In 2000, Mozambique made no debt service payments to bilateral creditors except to those that had indicted their intention to engage in negotiations for the delivery of HIPC assistance. - 20- value based thereon. Based on this review, some revisions to the debt outstanding as of end- 1998 (after original relief) were considered to be warranted, specifically with regard to debt owed to a number of bilateral creditors. Overall, the revised NPV of debt outstanding at end- 1998 after original HIPC Initiative relief is US$1,095 million, an increase of US$53 million over the amount indicated at the decision point (Table 11). The revisions relate both to Paris Club and non-Paris Club creditors and arise from new information on the amount or type of debt, as well as revisions to calculations.' 2 The original data on debts to multilateral creditors were confirmed. 57. The staffs recommend that the decisions on debt relief under the enhanced HIPC Initiative be amended to take into account these data revisions. The amount of additional assistance, US$53 million in NPV terms as of the decision point, would be equivalent to 10 percent of exports in 1998 (on a three-year average basis), and would bring the NPV of the debt-to-export ratio as of the reference year to 150 percent, in line with the enhanced HIPC Initiative framework. The common reduction factor that would be applied by all creditors to their end-1998 NPV debt would become 72.7 percent (inclusive of assistance provided under the original framework), compared with 72.1 percent as agreed at the decision point. Financing assurances are being sought from Mozambique's other creditors for their participation in this amended assistance level. Strengthened professional training in the court and prison systems as well as physical improvements of the prison system have already begun, and would be expanded with the implementation of the strategic plan. C. Updated Debt Sustainability Analysis 58. This updated debt sustainability analysis (DSA) is based on a long-term macroeconomic framework developed jointly by the authorities, the Fund, and IDA staff. This framework is derived from and extends the medium-term framework presented in Mozambique's first full PRSP (EBD/01O74, 8/29/01; IDA/SecM2001-0550). 3 The joint staff assessment of the PRSP, notes that there are risks to the ambitious growth target of 8 percent per annum established in the PARPA. In view of this, and in line with the slowdown in the growth rate in the outer years of the PARPA projection through 2010, a more cautious approach was taken as a central assumption for the purpose of assessing whether the level of debt and debt service is sustainable through 2020. The central scenario in the DSA therefore assumes that the growth rate averages 6.5 percent per annum through 2020. In addition, it is assumed that the nominal dollar value of external grants stabilizes at a somewhat lower level than projected in the PRSP. The detailed macroeconomic assumptions of the DSA are set out in Box 3, and the medium-term balance of payments in Table 12. 12 New information was obtained for Japan and Libya, and calculations were revised for China, Iraq, and Poland. 13The PRSP includes an annual projection for 2010, while this DSA is based on projections through 2020. - 21 - Box 3. Macroeconomic Assumptions Underlying the Debt Sustainability Analysis The following assumptions have been made: * GDP grows at 6.5 percent-somewhat lower than experienced during the period 1987-99. Unlike the 1990s when growth represented a bounce back from the war and structural reforms, growth in the next 20 years is projected to be driven by a substantial rise in investment (primarily foreign financed). * Annual inflation is 5 percent, reflecting sound fiscal, monetary, and exchange rate policies. * Government revenues rise from 12 percent of GDP in 2001 (Table 13) to 19 percent by 2020 as a result of reforms to the tax system, improved administration, and royalties from natural resource extraction projects. The domestic primary fiscal deficit including grants falls steadily to less than 1 percent of GDP in 2020. The external current account deficit, after grants, initially widens very sharply, reflecting imports for the construction of large projects before improving as exports from these projects come on line. From 2010 to 2020 the current account deficit will average 2 percent of GDP. * Exports of goods and nonfactor services (GNFS) rise at an average of 18 percent a year through 2010 (reflecting large projects) and at 4 percent a year from 2011 to 2020, reflecting the lumpiness of large project exports. * GNFS exports excluding large projects grow at an average rate of 8 percent through 2020, marginally lower than the 9.5 percent experienced over the last 10 years. The current account deficit excluding the impact of large projects narrows steadily over the period from just over 10 percent of GDP in 2001 to just over 6.5 percent of GDP in 2020, reflecting an improvement in domestic savings led by the public sector. The capital account surplus, which includes private inflows from the large projects, peaks at 34 percent of GDP in 2002 and averages 11 percent of GDP through 2010. From 2010 onward, the capital account is close to balance as amortization offsets new inflows. Loans from the official sector decline from their current level of 8 percent of GDP to 1 percent in 2020. The grant element of new debt declines from 60 percent to 50 percent. 59. Under the enhanced HIPC Initiative framework, Mozambique's debt is projected to be reduced to sustainable levels. The net present value (NPV) of Mozambique' s official debt stood at US$3.4 billion at end-2000-after partial delivery under the original HIPC Initiative (Table 14). It is projected to fall in 2001 to US$1.1 billion after full delivery under traditional debt-relief mechanisms and original and enhanced HIPC Initiatives (Table 15). Bilateral relief beyond that required under the HIPC Initiative is projected to reduce the NPV of Mozambique's debt by a fturther US$140 million in 2001. The NPV of official debt is projected to rise gradually over the next twenty years as new debt is taken on--reaching US$2.1 billion by 2020. However, as a proportion of GDP, the NPV of official debt is projected to fall steadily from 28 percent in 2001-02 to 14 percent by 2020 (Table 16). Given that exports are expected to rise much faster than GDP as a result of a number of large foreign- - 22 - financed investment projects (Box 4), the ratio of NPV of debt-to-exports will fall even more sharply, from 114 percent in 2001 to 41 percent in 2020. 60. Debt reduction is projected to keep official debt service within sustainable limits. Prior to the HIPC Initiative assistance, in 1998, Mozambique's actual debt-service payments amounted to US$104 million (equivalent to 20 percent of exports of goods and nonfactor services). In response to the devastating floods that hit Mozambique in 2000, donors have heavily front-loaded their assistance in 2000 and 2001 as a result of which debt service has fallen to only US$18 million in 2000 and US$28 million in 2001. As this front-loading comes to an end, debt service rises but peaks at only 5 percent of exports (US$55 million) in 2002 before falling to 3 percent in 2020 (Table 17). 61. As a check on the robustness of the projections, debt-service ratios were calculated excluding exports of large projects (see Table 16). This was done because exports from the large projects have an unusually large import component and are associated with large private debt service. Thus a smaller proportion than usual of the export revenue could be considered "available" to finance debt service. Excluding exports of large projects from the denominator raises the debt-service ratio from 5 percent to 11 percent in 2002. This is still only 55 percent of the debt-service ratio before HIPC Initiative relief. The difference between these alternative measures of debt service declines over time as exports from large projects decline as a percentage of total exports. By 2020, the debt-service ratio excluding large projects is 6 percent, just 3 percentage points higher than debt service including large project exports. 62. Although debt service is projected to be higher in relation to government revenues than projected at the time of the decision point for most of the period, it will be less than half the level without debt relief. In 1998, debt service paid was 23 percent of revenues, excluding grants. If official grants were included in revenues, the ratio would have been only 13 percent. Since then, the sharp depreciation of the metical has reduced the dollar value of government revenues so that they are now 30 percent lower than projected at the time of the decision point. 14 Nevertheless, debt service is projected to be 7 percent of government revenues excluding grants in 2001 and 13 percent in 2002, when the full year effect of the depreciation is apparent and the deferral of debt service to Paris Club creditors comes to an end. As a result of steady GDP growth and tax reforms designed to increase the tax base and improve tax administration, tax revenues are projected to more than triple in dollar terms in the next ten years. Debt service as a percentage of revenues is projected to fall to below 6 percent by 2020. 14 The projection assumes a constant real effective exchange rate from end-2001 onward. - 23 - Box 4. Implications of Large, Foreign-Financed Investment Projects in Mozambique Aided by its proximity to ';outh Africa, the return to operation of the Cahora Bassa hydroelectric power dam, and impressive structural reforms, Mozambique is one of the few HIPC countries to have attracted substantial foreign private sector investment. In 2001, an aluminum smelter worth US$1.3 billion was completed and six projects representing a further US$6.5 billion in foreign investment are in the pipeline. These projects will have a profound impact on economic growth and the balance of payments of Mozambique over the medium term. This debt sustainability analysis is based on the assumption that the six new projects are completed as planned, but it does not take into account a nuraber of other possible projects that are being discussed but for which the necessary financing may not yet have been secured by the private investors. The six new projects comprise the construction of the world's largest steel slab production facility, the extraction of natural gas, the construction of a gas pipeline to South Africa, mining, processing and smelting of titaniferous mineral sands, as well as the expansion of the MOZAL smelter and the hydroelectric power plant. Although most of the projects are expected to benefit from fiscal inducements, government policy is firmly opposed to providing any guarantees for the financing of the projects. It is estimated that revenues from the projects could reach 3 percent of GDP by 2010. The government's slrategy, as set out in the PRSP, envisages that these projects will assist in the growth of development corridors linking Mozambique to South Africa and Zimbabwe. Impact on the balance of payments In the early stages of these projects, large-scale investment (with a substantial import component) is due to be financed by capital inflows (both borrowing and foreign direct investment). As the projects come onstream, exports will rise sharply-in 2010, exports from these large projects are projected to be nearly 30 percent of GDP. However, this positive impact on the balance of payments will be offset to a large extent by higher imports of raw materials and outflows in the form of interest payments and amortization on loans used to finance the project, as well as remittances of profits and wages of foreign workers. The net impact on the balance of payments, will, by 2010, be only 13 percent of the increase in exports. This relatively low net impact reflects the fact that the projects are import and capital intensive and will be built primarily by foreign workers and contractors. Implications for private idebt While some of the investment in the large projects will be non-debt-creating foreign direct investment, roughly 60 percent of the inflows will be debt creating. Private borrowing has already risen from an average of US$36 million a year between 1990 and 1998 to an average of US$340 million in the last two years and is expected to average US$420 million in the next four years. While this investment promises to generate sufficient returns to enable the debt to be repaid, it illustrates the need for the authorities to improve their monitoring of private sector debt. The central bank is currently establishing a database to track private foreign debt that will allow the bank to observe if this debt reaches levels that could cause concern. Despite the projected sharp rise in the level of private debt, private debt service is projected to remain within reasonable bounds. Private sector debt service, which was 11 percent of exports of goods and nonfactor services in 2000, will rise to 20 percent before declining to 12 percent by 2020. - 24 - Corrected: 9/19/01 D. Comparison of Revised DSA with the DSA as of the Decision Point 63. The debt sustainability analysis presented here has been revised from that done at the time of the decision point to take into account new data and new projections; these reduced the NPV debt-to-exports ratio for 2000 from 163 percent estimated in April 2000 to 127 percent estimated now based on current exchange and discount rates. The revisions reflect new information on the debt stock in 1998, revisions to the macroeconomic and debt projects, pledges of additional assistance from bilateral creditors beyond HIPC Initiative relief, and the amended assistance under the enhanced HIPC Initiative in light of the revisions to the 1998 data. These elements are detailed below. 64. The debt stock at the end of 2000 before assistance under the enhanced HIPC Initiative was higher by US$234 million than projected at the time of the decision point (Table 18). As discussed in Section B, the estimated level of the debt stock at end- 1998 was revised upward by US$53 million as a result of new information provided by creditors and revisions to the calculations. This carried over into a higher level in 2000. In addition, the impact of the Paris Club deferral and changes in the timing and modalities of delivery of bilateral assistance was to raise the end-2000 stock by about US$49 million. The NPV of new borrowing in 1999 and 2000 was higher by US$35 million than projected at the time of the decision point, adding further to the stock. In addition, there was an error in the methodology for incorporating new borrowing into the 2000 projections, which led to an underestimate in the projection for end-2000 of US$90 million at.the time of the decision point.1 s The remaining difference of about US$7 million can be explained by changes in the timing and modality of the delivery of assistance from multilateral creditors.16 65. Higher debt relief, a higher discount rate, and higher exports than projected at the time of the decision point offset these changes in the stock of debt at end-2000. The staffs are recommending an increase in assistance under the enhanced HIPC Initiative of US$53 million to compensate for the revision to the end-1998 debt stock. Additional bilateral debt 15 These corrections affect the projection of the debt stock in 2000 but do not have an impact the level of debt in 1998 (the reference year for the calculation of enhanced HIPC Initiative relief). 16The projection for the NPV of debt at end-2000 made at the decision point assumed as a convention that debt relief was delivered as of the reference year, that is, end-1998. However, the HIPC Initiative framework more precisely provides for debt relief to have been delivered at the completion point under the original HIPC Initiative (i.e., July 1999) and as of the decision point under the enhanced framework (i.e., April 2000). The difference between the assumed delivery dates and those that actually apply imparted a downward bias to the projection of debt remaining after debt relief. In addition, Mozambique received more interim assistance than projected. To the extent that this was in the form of debt-service reduction rather than a change to the stock of debt, it means that the NPV of relief post-2000 is higher than previously projected. - 25 - relief beyond the HIPC Initiative is expected to reduce the debt stock in NPV terms by US$138 million calculated at end-2000. The discount rate and exports of goods and nonfactor services are also higher than those projected at the time of the decision point. The net impact is that the NPV of debt is now estimated to be 127 percent of exports. 66. The sharp depreciation of the metical against the dollar in 2000-01 and the lower- than-projected growth in 2000 mean that GDP in dollars in 2001 is projected to be US$3,309 million compared with US$4,698 million forecast at the time of the decision point (a reduction of 30 percent). Debt service as a percentage of GDP is consequently higher. GDP estimates for years have been revised to reflect the impact of the large projects that is captured by the authorities projections for the PRSP, and new work by the World Bank on potential growth including an assessment of the impact of HIV/AlDS. '7 The net effect is an upward revision of the average annual growth rate over the period through 2020 from 6 percent to 6.5 percent.18 67. Projections for exports have been revised upwards to reflect new information on large projects. Exports in 2001 are now projected to be US$1,081 million compared to US$823 million at the time of the decision point-reflecting the completion of the MOZAL aluminum smelter ahead of schedule. Other large projects help to boost projected exports to US$4 billion by 2010, compared to just over US$2 billion at the time of the decision point. 68. Government revenue (expressed in U.S. dollars) is expected to be 30 percent lower in 2001 than projected at the time of the decision point-primarily because of the depreciation of the metical. Revenues are thereafter projected to grow at a marginally lower rate than assumed at the time of the decision point. This is despite the higher growth rate and reflects the fact that a higher proportion of the growth will come from the large proj ects, which will generate less revenue per dollar of GDP than other sources of growth. As a result, revenues are 60 percent of those projected at the time of the decision point by the end of the period. 17 "Country Economic Memorandum: Growth Prospects and Reform Agenda," (20601-MZ). The impact of HIV/AIDS on the growth rate in Mozambique is still very uncertain. However, work on the impact of the disease in South Africa, which was used in the CEM suggests that it could reduce growth by around 1 percent of GDP a year. Although the prevalence rate in Mozambique is similar to that in South Africa, the structure of the economy is very different suggesting that the impact may be rather different in Mozambique. The government is currently undertaking further analysis to estimate the likely impact of the disease on growth in Mozambique. 18The DSA undertaken at the time of the decision point terminated in 2017, while the current projection extends to 2020. - 26 - 69. As a result of these revisions, debt service as a percentage of exports is projected to be lower for most of the period than projected at the time of the decision point while debt service as a percentage of government revenues is forecast to be higher for most of the period. By 2017, debt service is projected to be 2.7 percent of exports and 6.0 percent of revenues, compared with 3.4 percent and 3.0 percent, respectively, at the time of the decision point. E. Sensitivity Analysis 70. The projections presented above are subject to a number of risks including, in particular, the possibility of lower growth, less foreign investment, and more limited grant funding from donors. This section examines the implications for debt sustainability under more pessimistic assumptions than included in the baseline. Two specific scenarios are analyzed below. The first examines the likely impact of lower growth and lower exports on the balance of payments and debt service indicators. The second looks at the case where a larger proportion of government assistance comes in the form of concessional loans and less is in the form of grants. Given the large cushion created by the exports from the large projects, the debt service to export ratios is very healthy for most of the period but under both scenarios starts to climb from 2010 onward. In comparison, debt service as a percentage of revenues declines more slowly but also rises less in later years under both scenarios (Table 19 and Figure 1). Scenario 1: lower growth 71. While Mozambique has experienced impressive rates of growth of income and exports over the last 10 years, the country is vulnerable to natural disasters and has a high and growing incidence of HIV infection. Both these factors have been incorporated into the baseline macro framework but their impact is difficult to estimate. It is therefore possible that income and exports will grow more slowly than projected. Under the scenario presented here, it is assumed that one of the large projects is not completed. In addition, exports of goods and nonfactor services excluding large projects grow at an average of 8 percent a year compared with 9 percent under the baseline. Imports, including imports of raw materials, are also somewhat lower. GDP grows at 5 percent, compared with 6.5 percent under the baseline. The net impact is a current account surplus excluding interest of 3 percent, by 2010 compared to a surplus (excluding interest) of 5 percent of GDP under the baseline. It is assumed that the shortfall in the current account is accompanied by higher borrowing from the official sector. It is assumed that the authorities will not be able to secure this additional borrowing on as good terms as under the baseline and that, as a result, the average grant element of new borrowing falls from 54 percent under the baseline to 51 percent in this scenario. This higher borrowing requires US$100 million in additional debt-service payments by 2020. 72. Under this scenario, debt service rises steadily from 2010 (when the export growth from the large projects slows down). While the 6 percent level in 2020 is not a cause for concern, the upward trend could be. In comparison, because the growth in revenues comes later in the period than the growth in exports (both in the baseline and this scenario) and - 27 - therefore coincides with the increase in debt service, the ratio of debt service to revenues rises less rapidly than the debt-serviice ratio in outer years. Scenario 2: lower grants and more foreign borrowing 73. Mozambique has benefited from unusually high levels of foreign assistance, and particularly grants, over the last ten years. This level of assistance reflects Mozambique's low level of income per capita, the need to rebuild following the devastating civil war and natural disasters, as well as an impressive record of political and economic reform. Foreign assistance19 is projected to represent 21 percent of GDP in 2001, with 64 percent of this assistance coming in the form of grants. The baseline projection assumes a decline in assistance as a percentage of CiDP to 10 percent in 2010 and 2 percent in 2020. The proportion of assistance represented by grants, however, is projected to remain roughly constant reflecting the intention of the governmerLt, as set out in the PRSP, to keep its foreign borrowing, even on concessional terms, to a minimnum. 74. It is possible, however, that Mozambique will not be able to attract the projected level of grants and will have to rely on a higher level of foreign borrowing. Under scenario 2, it is assumed that grants fall to US$300 million in 2005 and US$100 million by 2015 and then stay constant in nominal terms (compared with US$350 million throughout the period under the baseline). Thus grants are 6 percent of GDP in 2005 and 1 percent of GDP by 2020. The shortfall is made up by additional borrowing. As in scenario 1, this additional borrowing is assumed to be secured on less concessional terms with the average grant element falling to 49 percent. Additional borrowing is also required to cover the higher debt-service costs with total debt service US$140 million above the baseline by 2020. 75. While debt service is higher than under scenario 1, exports are the same as under the baseline so that the debt-service ratio is between that under the baseline and scenario 1. Both the debt-service ratio and debt service-to-revenues ratios, while well below the current levels, are on an upward trend from 2013 onward. 76. This sensitivity analysis underlines the importance of Mozambique following prudent debt management polices. In particular, to avoid a new build up in debt, the authorities will need to continue to rely on grants and highly concessional loans. IV. CONCLUSIONS 77. The staffs of the Fund and IDA consider that Mozambique has met the conditions established in April 2000 for reaching the completion point. Mozambique's adjustment and reform efforts since the decision point have been satisfactory, and its progress in poverty reduction has been broadly acceptable. All quantitative performance criteria under the PRGF arrangement have been met th:rough end-June. There were some delays in structural policy 19 Grants and foreign borrowing from official sources. - 28 - implementation. However, on the most important of these, the difficult and multifaceted policy challenge of resolving a large insolvent bank, the authorities have worked closely with the staff of the Bank and the Fund to find an appropriate and cost effective way forward. Performance under the IDA lending program has also been satisfactory. Sharp increases in spending on priority programs, which will supported by further improvements in the monitoring of these expenditures, and improvements in key social indicators also attest to the authorities' progress in poverty reduction. Mozambique has also prepared it first full PRSP, which the staffs consider provides an adequate framework for continued support under the PRGF and IDA. Finally, Mozambique has also made satisfactory progress on a key set of policy reforms. All of these have been completed as indicated above. As regards the adoption of a strategic plan for the judicial system and new regulations for the telecommunications sector, the staffs consider that the progress made so far is adequate to constitute observance of the understandings at the decision point. 78. The updated debt sustainability analysis indicates that, based on revised debt data and calculations, the NPV of debt at end-1998 (after full application of traditional relief) has been revised upwards by US$53 million, equivalent to 10 percent of exports in 1998 (three-year average). Consequently, an upward revision of enhanced assistance of US$53 million is recommended to achieve the target NPV of debt-to-export ratio of 150 percent as of the decision point. 79. Participation by creditors in delivering assistance under the original HIPC Initiative framework has been very broad, with only a few non-Paris Club creditors yet to conclude agreements. Assurances have been obtained regarding participation in the enhanced Initiative from creditor representing more than 80 percent of the relief to be provided. Assurances regarding the amended amounts recommended in this paper are also being sought. It is anticipated that all necessary satisfactory assurances will be in place by mid-September. 80. The staffs consider that with the assistance provided under the original framework and expected to be provided under the enhanced Initiative Mozambique will achieve a sustainable debt and debt service profile. After full delivery of enhanced HIPC Initiative assistance, the NPV of debt would remain well under 150 percent of exports; possible additional debt relief from some Paris Club creditors would reduce the debt ratio below 120 percent from 2001 affording some additional margin for Mozambique to accommodate possible unfavorable developments. Accordingly, there is no issue of topping up of enhanced HIPC Initiative relief on the basis of the DSA at the completion point, as the debt ratios are below the enhanced Initiative's sustainability thresholds and there has not been a fundamental worsening of Mozambique's economic circumstances due to the adverse impact of exogenous shocks. While the sensitivity analysis provides some confidence that the debt position is robust to exogenous shocks, Mozambique will remain dependent on substantial concessional assistance over the medium term. In addition, economic performance will need to be carefully monitored and the macroeconomic policies adapted appropriately if growth, and, hence, revenue performance, fall short of expectations. - 29 - 81. In the light of the above, the staffs of the IMF and IDA recommend that the Executive Directors determine that the conditions for reaching the completion point under the enhanced HIPC Initiative have been met, once they have endorsed the joint staff assessment of the PRSP. V. ISSUES FOR DISCUSSION Executive Directors may wish to focus on the following issues and questions: * Do Directors agree with the proposed revision to the enhanced HIPC Initiative debt relief agreed to at the decision point? * Do Directors agree that Mozambique has met the floating conditions for reaching the completion point? * Do Directors agree that assistance agreed at the decision point (as revised) will provide Mozambique with a solid basis for debt sustainability over the medium term, within the framework of the HIPC Initiative, as discussed in Section III? * Do Directors agree that Mozambique should continue to seek debt relief from its non- Paris Club creditors within the framework of the HIPC Initiative and that the staffs should continue to monitor the delivery of debt relief from all creditors? * Do Directors agree with Mozambique's plans to strengthen debt-management capacity and policy, and that it is appropriate for Mozambique to continue to rely on concessional assistance to meet its development requirements? - 30 - Table 4. Comparison of Discount Rate and Exchange Rate Assumptions at end-I 998 and end-2000 1/ Discount Rates 1/ 2/ Exchange Rates 2/ (In percent per annum) (Currency per U.S. dollar) At Completion At Decision At Completion At Decision Point Point Point Point Currency Austrian schilling 6.25 5.28 14.79 11.75 Belgian franc 6.25 5.59 43.35 34.57 Canadian dollar 7.00 6.25 1.50 1.53 Swiss franc 5.33 4.05 1.64 1.38 Chinese yuan 6.09 5.25 8.28 8.28 Deutsche mark 6.25 5.16 2.10 1.67 Danish kroner 6.73 5.64 8.02 6.39 Domestic currency Metical 6.09 5.25 17140.50 12,322.21 European currency unit 6.25 5.00 1.07 0.86 Spanishpeseta 6.25 5.31 178.81 142.61 Finnishmarkaa 6.25 5.35 6.39 5.10 French franc 6.25 5.36 7.05 5.62 Indian rapee 6.09 5.25 46.75 42.48 Iraqi dinar 6.09 5.25 0.31 0.31 Iish punt 6.25 5.33 0.85 0.67 Italian lira 6.25 5.58 2080.89 1,653.10 Japanese yen 2.03 2.22 114.90 115.60 Kuwaiti dinar 6.09 5.25 0.31 0.30 Netherland guilder 6.25 5.78 2.37 1.89 Norwegian kroner 8.02 6.54 8.85 7.60 Portuguese escudo 6.25 5.25 215.46 171.83 Russian rubble 7.19 6.23 0.60 0.60 Special drawing rights 6.09 5.25 0.77 0.71 Swedish kroner 6.20 5.66 9.54 8.06 United Kingdom pound sterling 6.73 6.81 0.67 0.60 United States dollar 7.19 6.23 1.00 1.00 Memorandum item: Paris Club cut-off-date is Pebruary 1, 1984 Statistics. Sources: OECD; and IMF, InternationalFinancial 1/ The discount rates used are the average commercial interest reference rates (CIRRs) for the respective currencies over the six-month . period ending in December 2000 for the completion point and in December 1998 for the decisionpoint. 2/ For all currencies for which the CIRRs are not available, the SDR discount rate is used as the proxy. Table 5: Mozarnbique - Status of Creditor Participation Under the Original HIPC Initiative Debt Relief In NPV TerrY Percentgeof Sallstfet-ry Modalties To (UISS i.) Total Asiftnee Reply Deliver Debt Relief Inaplemeoted IDA 11 353 20.6 Yes AnlDAgrrotofUSS1l4mulinn(equvale.nttatheprovisi.nofUS554nditia .fdebtrelieftnNPV Yes terms) was provided dang the interimperiod. An addiional US$327 milion of debt reief (i NPV teems) asprovided HIPC t wHP CeTrrustiord bawing ou fBRI)netincome transfers, tiawughpurchase and canellation ofg IDA credits. AfDB Group 120 7.0 Yes he Afncan Development Btak Oroup purchased aid canaeled 21 loans (7 AfDB loans and 14 AtDF Yes credits) with a face vraue of US$221 milEnato deliver the fidu Thi. required the NPV relief reNrpered one of AlDB's ovwn contibution of UA 33 million (equivalent to about US$45 milion), as well as a grant from the HIPC Tomt Fund of US$87 miLion to theAfDB to support this operaion IMF 1/ 115 6.7 Yes lHIPC asistane bcing provided through debt srvrce reducton, using a gant from HlPCtPRGF Trst YeU deposited into an acrow accoant in the ntme of the government 1 F / EIB 21 1.2 Yes Debt relief is being preoided through combination of camceRation ofoutstanding balances of5 loarns amd Yes a parta cancellation an a risk capital lat IFAD 13 0.7 Yes USS30,00 p year vith Debtservice is Ilititedto a tokei therest being forge-n until h reqired Ye NPV debt redueton a achieved. Mozeambique would resume payments under normal tenmsthaeafter. EADfA to 06 Yes Debt reiefofUS$81 milion in NPV toneswas provided tlrogjh concessiond rescheduohig ofthe Yes disbursed and outstandmg balances of seven loarn ala reduced inteimt rateof 0.5 percent with a maturity of 33 years, induding a aix-year grace period. The remainder is expected to be provided m combinaion with the enhanced HIPC relief at the completion point yidding a redution in the NPV of debt ofI US$2.8 mlon. OPEC Fmad 8 04 Yes The orginal debt rlief proposed by the OPEC FPmd included a caibiatien of extension of matrity on No selected loan aswell as provision of a concessional loan to be rued for debt serce. The Oovemment n drsasng the possibilty ofobtainmg; the origina and enhanced HOIPC asistmae irnoone dcbt resuctamitg operation. Nordic Developomeut Fond 2.4 0.1 Yes Dcbt service due from Mo rambique is beiDng paid by the NDF through the HlPC Trust Fumd, using the Yes fOids initially deposited by NDF into the HIPC Yast Fand plus the accrued interest laneDeve lopment lBank 0 0.0 Not applicable IslTmic Development Book did not have any exposure to Mozainbique at the completion point, andwas Not applicable any reief ender the HIPC Intiative. not required to pronvde Total Mulllateral 11 641 37 Peels Club CredItors 845 49.3 Yes Stock-of-debt operaion maideLyon tenms (80 percent NPV redaction) on October 30, 1998. Yes Non-Peris Club Creditors 190 11.1 Algeria Yes lov rescheduling ader Lyon terms Yes Poland Yea Poland indicated that *willinitiate bilateral discussions to provide HIPC reief to Mozambique. No Adi Somlia Yes offici ADl loans to Mozambique has been casncelld after the ocigisal completion pomt Ye Otberf No concocted by Mozambique Beim,, No Conaseecial Credters 41 2.4 No Binagconacted by Mozanibiqute No Total Bilterl -andCoasardrda 10/ 1076 63 TOTAL 1716 100 Scorce: "-HPCDebtlnitiatve,The Chinman's Summaryofthe Mutlbltmra Devdlopment Barslca' - March 14-IS, 2001- IDA/SaM2WOI-0225, Moreh 28,2001; and b'amWFand MMeting staffnestisate. of rbilatealcreditors include, and forIDA and IMP excide, USS29madionad US$IOrlion i/ Amountsshfit lmNPVtemns cominttedby IDA and LMFrespectivelyas prtaft hegpp-filling ercise olthi decision pointtadthe orignalHIPC Itive. Table 6: Mozarnbique -Status of Creditor Participation Unider the Entanced HIPC Iritiative Debt Relief in NPV Terms Percentage of Satisfactory Modalities To USS il _.) Total Assistance Reply Ddiver Debt Relief Intplemented IDA 52.4 20.6 Yes IIIPC assistance is cuorently being provided through an interim debt servicereduction covering 100 Yes percent of debt serviceduebetween April 2000andMunch2001, and 50 percent ofdebt servicedue until Mozambique reaches the completion point The irrevocable delivery ofcompletion point HIPC assistance would enablethe 50 percent debt service reduction to continue until 2009. AfDB Group 18.8 7.4 Yes Debt servic reduction of about 80 percent stuntingatthe decision point until the beginning of2009, Yen pactof which would bemadeirrevocable whenMozambique reaches thedecision point The relief under to be funded through the lIRtC Trust Pund andAfDB's own resources. this modality is expected IMF 15.6 6.1 Yes BFPC assistance is being provided through debt serviceteduction, including a 100percent debt service Yes reduction in the first yearto support the Govemoeno's flood rehabilitation. The assistanceis being provided using agrant from IIIPC/PRGF Test. Ei/EI 3.2 1.3 Yes at the completion point. Debt elief to be provided through a pairtl cancellation on a risk capital auan No WAD 1.9 0.8 Yes Debt service is limited to a token USS30,000 peryear with therSt being forgiven until the required No NPV debt reduction i achieved. This relief, to be provided atthe completinn point, would extend the debt service reduction period gmrted under the original fhamework. BADEA 1.2 05 Yes BADEA management hasindicated in intention to pmvrdnthe topped-up relief urder the original EDPC No framework aswell asthe enhanced HLPCassistance at the completion point The modality ofdebt relief is expected to be similar to the original framework. OPEC Fund 1.2 05 Yes Theoriginal debt relief proposed by the OPEC Fund included a combination of extension of maturity on No selected loass a wellan provision ofaconcessio.sl lo,utro beaned for debtservice. TheGovemment is discussing the possibility of obtaining the origirralandenhanced ETPCassitance in onedebt restructuring operation. N) Nordic Development Fund 0.4 0.2 Yes Debt serviceduefrom Moarmbique is being paid by theNDF through theFIIPC Trust Fund, using the No funds initially deposited by NDF into the HfPC TsUt Fund planthe accrued interest. The enhanced HTIC mssistance reduction to be extended by [4] yean. would allow the debt service IslamiclDevelopment Bank 0.0 00 Not applicable Islamic Development Bank d id not haveartyexposure to Mozacnbique atthe completion point, andwas Nut applicable not requiredto provide any relref under the HIPC Ineitatve. Total Multilateral 94.7 37 Paris Club Creditors 125 49 2 Yes Total deferal of debt service until the campletion poilIt areder the enhanced HTPCfiareor,k Yes Non-Paris Club Creditors 28 11.1 Algeria No Flow rescheduling under Lyon terms; Mozambsque arequesting enhaniced HIPC assistance. Yes Polmnd Yes poland iredicated to provide IHIPC relief to Mozambiqua. that nwill iniatec bilateral discussions No South Africa Yes afterthe origerral All official loansto Mozambique hasbeencancelled completion point Yes Others No Being contacted by Mozambique No Commercial Creditors 6 2A No Being contacted byMoza-bique No Total Bilateral and Commercial 159 63 TOTAL 11 254 100 Source: "HTPCDebt inhiative, TheChaimman 's Summary orthe Muatilateral Development Banks' Meeting - March 14-15, 2001", fDAISecM2001-0225, March 28,2001;andBank/Fund staffestimates. if Thetotal HmPC presented assistance herecorrespond to the amount committed at thedecision point under the enhanced HIPC framework, anddoesnot reflect the additional USS53 million required asa resa of decismon piont data revision. Table 7. Mozambique: Estimated Assistance at Enhanced Decision Point (amended) 1/ (In millions of U.S dollars in NPV terns at end-1998, unless otherwise indicated) NPV of debt-to-Exports Assistance 2/3/ Common Target Total Bilateral 4/ Multilateral Ofwhich Reduction Factor IIIPC Initialive F-ramework (percent) IDA IMF AIDB Other (wereettof end-1998 NPVS of debt) Original Framework 200 1,716 1,076 641 352 115 119 55 62.8 5' Enhanced Framnework (Decision Point document) 150 254 159 95 53 16 19 8 Enhanced Framework (amnended) 150 306 i94 112 62 iS 22 9 Total (amended) 150 2,023 1,270 753 414 133 141 64 72.7 Memorandum items NPVofdebtatend-1998 2/ 2,784 1,764 1,019 564 168 202 86 Paris Club (incl. Brazil) ... 1,386 ... Of which: pre-cuboff date debt ... 1,144 Non-Paris Club &Commercial .. 378 Ofwhich: pre-cutoff date debt ... 349 ,,, 3-year average of exports (1996-98) 507 ... NPV of debt-to-exports ratio 6/ 549 Sourece: Mozambiras authoities; and staffFestmistea. It Theproportiona] burden sharing approach is described in HllChtiative--Estunated Cots and Burden Sharig Approaches' =EBSf97/127. 7/7/97 and WA/SEC M 97-306, 1/7f97). 2/ Band on latest data available at nd-I 998 after f1ulapplication oftOadinonal debt relief euhbaniss. 3/ A-oI ,h, to bilse- rreditor5 i-lud, end flr IDA ad e11x urlde, U5$29 million and S$Z1 0 riiliou in mNPV tcrmn .oiiuiteid by IDA and IMF r-putivoly i pint ofth gap-rlinl exercise at the decision point uider the origial IPC itise. 4/ ncludes official bilateral and commercial creditors. 51 The reduction factor for mulatiaral creditors under tbe original RC hntiative. based onrnd-I 997 data, was 755 percent 6' In percent of three-year export average. Table 8. Mozanbique: Delivery of IDA Assistance Under the Original and Enhanced HIPC Initiative, 1999-2035 (In millons of U.S. dollars, unless otherwise indicated) NPV relief Cumulative required 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-23 2024-35 1999-2035 Debt servicebefore RHC Assistance 1/ 15.6 19.8 20.5 22.9 27.0 30.6 34.5 35.7 37.5 39.9 42.1 45.9 748.3 498.5 1618.7 Debt Service after llPC Assistance Original lHPCFramework 10.9 9.0 9.6 10.3 12.5 14.3 15.6 16.3 17.4 18.1 19.5 22.0 373.0 275.4 824.0 Original&EnhancedHIlPC Framework 10.9 1.7 3.6 3.8 4.8 5.6 6.2 6.8 7.1 6.9 16.4 22.0 373.0 275.4 744.2 Savings on debt service to IDA Original RTIC Framework 2/3/ 381 4.7 10.8 10.8 12.6 14.4 16.3 18.9 19.4 20.1 21.8 22.6 23.9 375.3 223.0 794.8 Enhanced HIPCl'ramcwork 63 0 7.3 6.1 6.5 7.7 8.7 9.4 9.5 10.3 11.3 3.1 0.0 0.0 0.0 79.8 Oliginal&Enhanced HIPC'Framework 444 4.7 18.1 16.9 19.2 22.1 25.0 28.3 28.9 30.4 33.1 25.7 23.9 375.3 223.0 874.6 Savngs as percent of debt service due Oiginal HIPC Framework 30 55 53 55 53 53 55 54 54 55 54 52 50 45 49 Original &Enhanced HIPC Framework 30 91 83 84 82 82 82 81 81 83 61 52 50 45 54 Source: IDA staff estimates. 1/ Debt service due based on end-2000 stock of existing credits, and credits purchased and cancelled by the HIPC Trust Fund under the original HIPC framework. 2/ Required NPV reduction under the original HIPC nitiative was achieved through a purchase and cancellation of 8 credits (NPV reduction US$327 mullion) by the HIPC Trust Fund, and a US$150 million IDA grant provided to Mozambique in 1999 with an NPV value of $54.22 million. 3/ The relief under the original HIPC framework (USS381 mullion in NPV terms) includes an additional contribution of US$29 million in NPV tenns conunitted by IDA toward fdiUng the financing gap. Table 9. Mozambique: DeUvery of IMF Assistatsce under the EIPC Initiative I/ (In millUons of SDRs, unless otherwise Indicated) Actual 2001 2001 2002 2003 2004 2005 2006 2007 200S 2009 2000 Jan. -Mar. Apr.-Aug. Sep.-Dec. Est Total 2.1 5.6 8.0 15.7 10.6 70 7.5 9.5 9.7 6.7 3.6 0.6 ProfileoftntatassistanceundertLheHIPC(ogineldandenhanced; iupercent) 19.4 20.2 2.1 6.3 6.5 14.9 10.0 7.0 7.6 9.7 10.0 6.5 3.1 - DeliveryscheduleofMPFsiatance originalHiPCInitiative(inpercent) 8.0 8.0 8.0 7.0 5.0 5 13.9 2.2 0.7 18.1 21.1 15.0 7.0 7.0 Delivery schedule ofhl nslatance: enhancedHtPC Iniiative(in percent) 3.1 9.5 9.1 21.7 17.6 15.2 15.6 17.0 15.7 11.8 8.0 2.9 DebtServicedueoneurrent MPobligations2/ 23.0 2.9 3.1 9.1 8.8 21.0 17.1 14.8 15.3 16.8 15.5 Il.8 8.0 Principal -as ot second decision point 22.2 -- 0.4 0.3 0.7 0.5 0.4 0.3 0.2 0.2 0.1 0.0 0.0 Interest 0.8 a IMF ssistance-depasiat into members acount Completion point assisance - Original HtIPC 3/ 93.2 Tnterim assistance -Enhanced HIPC 2.3 Completion point assistance - Enhanced HIPC 4/ 11.4 2.7 8.6 6.0 17.4 12.3 8.9 9.1 10.7 10.5 6.8 3.2 0.1 IMFassistance under originalHIPC Initiative 21.0 18.9 2.0 5.8 6.0 13.8 9.3 6,5 7.1 9.0 9.3 6.1 2.9 - rMF assistance without interest 2.4 2.0 1.6 1.2 0.7 0.3 0.1 2.1 0.8 2.8 -- 3.6 3.0 nterest eamings 0.3 0.2 2.5 3.0 2.5 1,7 1.6 1.4 1.3 1.3 1.1 0.8 IMO?assistance undet enhanced HIPC Initiative 5/ 2.0 0.3 0.1 2.5 2.9 2.1 1.0 1.0 1.1 1.1 .1 1.0 0.7 iMP awsistance without interest 1.9 0.1 *- 0.1 0.4 0.7 0.6 0.3 0.2 0.2 0.1 0.1 Estimated interesteamings 0.1 0.0 3.1 8.8 8.5 20.4 04.8 10.6 10:6 12.0 11.8 8.0 4.3 0.8 TotallMFassistancetundertheHHIPCltifative 23.0 2.3 5.9 8.5 16.7 11.4 7.5 8,0 10.1 10A 7.2 3.8 0.7 IMF assistance without interest 20.8 0.8 2.9 - 3.6 3.4 3.1 2.6 1.9 1.4 0.9 0.4 0.1 Estimated interest eamings 2.2 - 0.7 0.6 1.3 2.8 4.6 5.0 5.0 319 3.8 3.7 2.1 Debt service due on currentIMlF obligations after MP assisance 5/ - Share of debt service due on current IMP obligations covered by 84.1 69.5 68.0 70.6 75A 67.8 53.3 28.1 100.0 100.0 92.6 93.8 94.1 IMF sistance (in percent) 5/ Memorandum Items: Proportion (in percent) ofeach repayment falling due during the period tobe paid 66.4 50.5 52.5 60.3 67.0 60.8 48.2 23.4 93.8 74.2 65.3 96.7 79.8 by I HIPC Initiative assistance from the principal deposited in members account 44.0 46.2 53.8 60.0 51.5 36.2 - 85.1 64.2 64.2 68.5 66.0 54.4 ofwhich: under the original HIPC Initiative 42.6 71.0 56.8 170.5 185.7 187.4 187.9 193.2 193.5 177.3 178.7 176.9 Total debt seFvice due (millios ofU.S. dollars) 6/ 118.7 3.9 12.2 11.7 27.8 22.6 19.5 20.1 21.9 201 15.2 103 3.8 ofwhich: debtservice due on IF obligations (millions ofU.S. dollars) 29.5 Debt service due on current IMF obligations after OMP assistanee 5/ 5.8 6.3 6.3 4.8 4.8 4.7 2.6 dollam - 0- .9 0.8 1.7 3.5 In millions ofTU.S. 0.3 0.2 0.2 0.2 0.1 0.1 - -- .2 0.2 0.2 0.3 0.5 In percent ofexports 9.2 IS.9 19.2 15.3 10.3 7.3 7.4 8.1 7.9 5.9 3.1 0.7 Share oftotal debtservice covered byMPtassistance (in perccnt)5/ 24.8 Source: Member authorities; and Fund staffestimates. on membees account and on committed but undisbumed amounts as described in footnotes I/ Total DMO assistance under the HIPC Initiative k SDR 106.9 million calculated on the basis of data available atthe enhancedEiPC decision point, excluding interest eamed delivery prior to and after the proposed completion point in September 2001. 4 and S.Please note, the monthly breakdown for 2001 is presented to show the delivery of 100 percent ofdebt service coverage through early 2001, and tht March 27, 2000). Interest obligations include SDRDepattmerit charges of SDR 36.8 miDion approved oct 2/ Poaloming obligations estimated based on rutes amd psncipal sohedules in effect as ofMarch 31, 2000 (excluding debtservice due on the PRGF disbusement and fees. 3/Amount ofassistance actually disbursed into members account at orignal 3PC completion point in June 1999. 4/A final disbursement of SDR 11,415,709 assumed to be disbursed into members accountat the enhancedHiPC completion point in September2001. point it is asumedthat these amounts earnsa te of retum of Spercent in SDRtemnn actual interest S/ Includes estismated interest eamings on: (I) amounts held in member's account; and (2) amounts coomined but notyet disbursed up to the second completion calendar year except in the final year, when it will be used toward payment oEthe final obligation(s) failing earnings may be higher or lower. Interest acrued on (1)during a caleodar year will be used tward the first repayment obligation(s) falling due in the following after the completion point due in that year. Intertst accrued on (2) duoing the interim period will be used toward the repaytnent of obligadtons falling due during the three years 6/ After traditional debt relief meehanitms. Table 10 Pais Club Creditors' Delivery of Debt Relief Under Bilateral Initiatives Beyond the HIPC imtiative ODA Non_ODA CoantricK Covered (In p-rcnt) (In portent) Prfoson or Rade Frd-COD Pod-COD Pre-COD Prst-COD cdsonnPoint Coaspledl Point (1) (2) (3) (4) (5) (6) (7) Auolio HIPC. 100 100 100 IW I/ 1/ / A.M..a mH Ccao-by-co) C-kby' (100) Cas-by-n (100) ce-by- (100) Case-by-case Cs-by- BewiKnRICK 100 100 Cas-by-cs flow Stok Ctnada KIPCK/ . 3/ -3/ 1I0 IOD 0fow IW Stock Dennntk H1O 100 Ceby-e . , Stock Froitm HIPC 100 100 t0 100flo 71 Stok Finland HlPC 95 98 OIasy H1Po 100 100D10 100now stock lNy H"IPC 100 100 100 10C 100 fow Stock R. * ICK too 10 100 - St-ck Nothaluado HIPCs too 100 100 .90-100 flow 5/ Stock 3/ Norway ltIPCs .3/ -3 100 100 W loo flow Stock. Ross. Cas-by-cast Stock Spein NWC 100 Cu-kby- Cst-by-e C-by- Stock Swedon Cs.e-by-c_ 3/ 3. CY.-cYse (100) - Stock Swkseaid N - 31 - Cue-by-ca Cas-by-ass Cm-by-cut, fow St&ck UdoKdltingd ItIpcW 100 100 100 100 6/ 100now 0V Stock SUb7 Utaedstgo 100 100 100 1004/ 100 low Stock Source: Paris Club Secretaria 1/ Austrlia: (a) post-COD non-ODA relief to apply to debts incurred before a date to be finalised; (b) timing details for both flow and stock relief are to be fuiaoised. 2/ Canada: including BHatadesk Canada has ganted a moratorivn of debt sevice as ofJanuary 2001 on al debt disbursed before end-March 1999 for 11 out of 17 HIPCs with debt service due to Canada. The debt will be wnrtten of at the completion point The countries to be covered are: Beii, Bolivia, Carnroon, Ethiopia Guyana, Honduras, Madascar, Mali Snal, Tanzania, and Zambia 3/ 100 percent of ODA claim have already been canceUed onttIPCs, with the exception of Myinar's debt to Canada. 4/ United States: 100 percent post-COD non-ODA treated on debt assumed peior to 06/20/9 (the Cologne Summit). 51 The Netherlands: (a) ODA: 100 percent ODA pre- and post-cutoff date debt will be cancelled at decision point; (b) nom-ODA: in some particular cases (Bolivia, Burkina Faso, Mali, Ethiopia. Nicaragu and Tanzania), the Netherlards will write off 100 percent of the cxsolidated amounts on the flow at decision point; all ochr HICs will receive interim reliefup to 90 percent reduction ofthe consolidated amounts At completion point, all HIPC countrics will receive 100 percent cancellation of the remaining stock of the pre-COD debt 6/ United Kingdom: 'beyond 100%: full waite-offofall debts of HlPCs as of their decision points, and reimbursement at the decision potnt of any debt servicc puad before the decision poinL 7/ France: canicllation of 100 percent of debt service on pre-cutoff date commercial claims as they fal due stating at the decision point SU On debt assnmed before December 31, 1997. Note: Coluonis (1) to (7) describe the additional debt reliefprovided following a specific methodology under bilateral initiatives and need to be read as a whole for each creditor. In column (1). 'HJPCs" stands for eligible countries effectively qualiying for the HIPC process. A "100 percent" mention in the table means that the debt relief provided under the enhanced HIC framework will be topped up to 100 percent though a bilateral itiatrve. - 37 - Table 1. MozaImbique: External Public and Publicly-Guaranteed Debt, end-Decemnber 1998 (revised) (In millions of U.S. dollars) NPV of Debt After traditional debt After original HIPC Initiative 2/ relief meohanisms As in Decision Point After enhanced HIPC (revised) 1/ dooument Revised Initiative (revised) 3/ Total Debt 2,784 1,042 1,095 841 Multilateral creditors 1,019 395 395 303 IDA U 564 237 237 182 AfDB Group 202 83 83 63 IMF 168 43 43 33 EU/EIB 35 14 14 11 IFAD 21 8 S 6 BADEA 13 3 3 3 OPEC Fund 13 5 S 4 Nordic Development Fund 5 2 2 2 Paris Club creditors 1,386 511 552 424 Austria 10 2 2 2 Brazil 117 30 30 23 France 263 119 119 91 Germany 112 34 34 26 Italy 249 85 85 65 Japan 5/ 76 6 47 36 Portugal 226 79 79 61 Russia 205 110 110 84 Spain 28 21 21 16 Sweden 5 1 1 1 United Kingdom 72 16 16 12 United States 25 7 7 5 Non-Paris Club creditors 313 112 124 95 Algeria 127 47 47 36 Angola 15 6 6 4 Bulgaria 9 3 3 2 China 7 1 6 4 Cuba 2 1 1 1 Former Yugodavia I 0 0 0 Hungary 5 2 2 2 India 3 1 1 1 Iraq 25 9 10 8 Kuwait 25 9 9 7 Libya 40 13 18 14 Romania 34 13 13 10 North Korea 0 0 0 0 Poland 5 1 3 2 Slovak Republic 10 4 4 3 South Africa 5 2 2 1 Commercial creditors 65 24 24 19 Brazil 53 20 20 15 France 7 3 3 2 Portugal 5 2 2 1 Souroes: Mozambican authorities; and staff eatimates. 1/The NPVs of debt for bilateral and cormmercial creditors reflect a hypothetical stock-of-debt operation on Naples terms at end-1998 Actual stock-of-debt operations on Naples, Lyon, and Cologne terms have not been implemented but are expcted to be consolidated into one operation at the complebon point, and could result in some revisions. 2/Assuming a hypothetical stock-of-debt operation on Lyon terms at end-I 998, and deliveTy ofHIPC debt relief at the completion point under the original HIPC Initiative. 3i Assuming a hypothetical stock-of-debt operation on Cologne terms at end-I 998, and delivery of HIPC debt relief at the decision point under the enhanced HIPC Initiative. 4J Excludes the impact of debt relief provided by trough an IDA grant of USS150 million duringthe interim period under the origianl HIPC Initiative. 5/Includes 3 loamn previously classified as debt to comnmercial creditors. (In o0orioo of U.S. dollrs. unilessothewis specified) Pyo., Outer Year Av geeo 1999 200 2001 2002 2003 2004 2002 2010 2020 2000-20 10 20 11-2020 T9odebeI-o .916.1 -793.2 -600 1 -1,352.3 -1.2%00 -106.6 211.5 457.1 -346.4 60.3 60.6 Esosos (fo.b.) 283.7 364.0 744.0 778.0 809.6 180D4.8 2,23354 3,367.1 4,187.2 2,726.5 3,753.8 1.,pp.ojer 75.8 127.2 487.0 489.0 496.2 1,472.6 1,873.0 2,825-1 2,856-1 2,263.0 2,842.2 Othoroq,ort 207.9 236.8 257.0 209.6 313.4 332.2 360.4 542.0 1,331.1 463.5 911.7 fimros. (.i.f) -1.199.8 -1.1572 -1.3521 -2,131.0 .2059.6 -1.911.4 -2,022.0 -2.910.0 -4.5333.7 -2,666.2 -3,693.3 Lsgeprsjee. -314.4 -176.2 -391.1 -1,117.1 -1.030.5 -961.8 -003.6 -1,336.3 -1.241.3 -1.278.4 -2,727.3 Ott-hor90 0 -695.4 .980.7 -961.0 -1.013.9 -1,029.1 -1,049.6 -1.120.4 -1,573.7 -3,192.4 -1,387.8 .2,354.2 lsoi=(naS ~~~~~~~~~~~~~~~~~~-256.0 -213.5 -376.4 -708.7 -520.6 .648.8 -697.4 -812.3 -420.6 -986.6 -624.6 Rereipt 325.6 405 1 374.1 395.9 420.3 443.5 473.7 646.0 1,429.1 369.7 1,003.4 Eapurditr.- .59L.6 -618.6 -739.5 -1,104.5 -040.9 -1.0914.2 -1,171.6 -1,459.4 -1.849.7 -1.556.3 .1.6604.0 (3fj,,&jh i~oer -197.7 -204.7 -220.4 -214A4 -225.1 -290.0 -291.9 -337.2 -380.0 -300.9 -362.0 Ofrehic0ha0er-tooobIic d& -161.6 -160.0 .145.4 -146.6 -1313.0 -121.2 -114. -017.9 -92 8 -98.2 .95.2 i,oor..opdiv.Oed&r -36.1 -43.9 -74.5 -67.9 -91.3 .160.8 -181.4 -239.4 287.2 -202.7 .143.7 Ou.a g .e -rro.9eoola d,os -1.152.1 .1.006.7 -984 5 -2,061.0 41770.4 -755A -486.5 -355.4 -767.A -926.3 -594.0 U.roqart.dofloalraofer 16 434.1 503.9 446.4 448.3 400.0 350.0 350.0 350.0 350.0 350.0 330.0 Csoo0eioan .dol ieg gre, -710 0 -442 8 -538.1 -1.612.7 -1,370.6 -405.4 -136.5 -5.4 -417.1 .576 3 -244.0 C-Oee.troon.ex di.9 hnoeproj.r -172.7 -304.0 -339.6 -325.0 -335 0 -364.1 -332.3 -583.1 -901.7 -505.7 -920.9 C9,iut.eIero,o 613.4 270.0 131.1 1,214 5 970.5 11.2 -70.9 -104.6 183.5 500.0 43.3 F-i0,b -mg.,a 472.0 483.8 374.0 925.5 8475.7 366.0 291.0 200.3 3331.1 633.5 303.9 P.bh,r 111.7 161.7 259.7 195.3 139.0 100.0 160.0 193.0 190.0 176.0 100.0 P4oi-te2' 360.3 322 1 135.3 040.0 696.7 206.0 151.0 800.3 153.1 457.5 125.9. Ao,o,tt-i0o -240 3 -344.0 -396.3 .40953 479.7 .463.2 4437 .437.2 -622.6 -339.6 -248.5 P.bli. -200.7 -306.3 -305.9 -319.1 -320.4 -204.6 -244.3 -131.3 -239.4 -121.6 .203.5 P4oi,m -39.6 -3705 -90.4 -00.4 -153.3 -176 6 -190.2 -300.0 -303.3 -250.0 -134.2 Oro1ierealnr~~~~~~~~~~0(crt) ~~~~3017 130.2 153.1 7090 61235 178 5 70.9 72.3 470.1 235.0 200.0 Nlflo ort ,.j 52 5 15.7 16.1 60.9 40.9 104.6 229.1J 370.9 366.0 362.3 37123 Shon- :4nlz -J-- .,mdor 4. roY,7 2. .107 4 -17.5 0.0 0.0 0.0 430 070 0.0 0.0 0.3 00f.h6h.-. r-a bormNTfAr.rorr.--, -200.4 -1735 0.0 0.0 0.0 0. 5.0 0.0 0.0 00 l7n-ol bolon- -253.0 -356.2 -424.4 -300.2 -392.2 -320.2 -213.4 -109.0 -251.5 -66.5 -200 7 Fitor-cl,,J.r 4 4.6tro,6 -8000.4 -99.0 0.0 -12.4 -13.3 -30.9 -04.2 110.0 -25.0 -06.7 200.7 BekfM4oairr,qoo (NI'Alrnra- ).4609 -08.0 0.0 -12.4 -13.3 -30.0 -04.2 -61.7 -25.8 -96.7 -28.9 ŽoerOoa3uoolrava oar.)~'-44 1 -125.1 1698 -11.9 .4.4 -10.9 .57.3 .45.8 0. -68.3 -11.4 1.SeofiO.0-ht006) .2.0 31.1 -16.8 -1.4 -109 -20.1 .70.9 -15.9 -23.9 .28.4 -17.5 Mdr (oE) 0.0 0.0 00 0.0 0.0 0.9 0.0 5.0 15.0 3.0 10.2 Nd lhwginerna(ireaar) -761.5 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 Finencirg ap pdor 10debt rel,d 0044.3 440.2 424.5 410.6 403.4 355.1 297.6 171.6 255.4 163.2 229.6 D.bt ro, 4/ 6.0443 449.2 424.4 410.6 405.3 333.0 297.6 171.6 253.3 163 2 220.6 Ddat rinfor6ad 0-r,a -r. I,ja 972.2 299.0 201.0 279.2 271.7 219.1 161.0 42.1 09.3 30 6 63.4 Aari4-rerdortl,oarig-llHIPC T,,irti,,tx 31.3 103.6 98.9 92.8 05.3 96.5 9.6A 101.6 146. 91.1 133.4 A.,iOaroerdorts.s.rbarredOllPClo,6i6 0.0 10.0 174 27.1 27.3 20.4 29.0 22.0 29.9 20.9 25.2 Addit .on blt-1.0. -sejt-r 0.3 0.0 0.9 11.6 11.3 II 0 1069 5.0 9.6 6.6 76 Ps.inCl.b de-for.1(1d e1io 20.5 36.6 26.2 0.0 6.0 0.0 0.0 0.0 0.0 0.0 0.0 Fi- r 0 apft debt einf 0.0 0.0 0.0 0.0 0.0 00 00 6.0 6.0 00 0.0 Mernoardu it-m; Curreo moro0 deflit (i. Ps-t0 ofGDP) HeOrrgreat 20.1 26.3 209A 57.8 44.5 16.9 10.0 3.0 5.1 15.2 04 A0Oorgrs.oa17.3 11.6 10.3 45.2 34.5 9.1 2.0 0.1 2.9 9.2 2.1 Fl,udio6l.rg. proj.U 4.2 8.1 10.3 9.1 8.4 8.2 9.1 8.2 6.6 9.2 7.5 Coo.. 6asot)o.6al rea,. 669.3 745.4 720.6 739.6 744.0 704.8 812.1 1,153.4 1,207.6 1,029.6 1,261.3 (ioa..,Al.of 4nwoelof GNFS) 3.5 6.1 3.3 3.7 3.9 4.2 43 4.3 3.0 4.2 3.7 (i. ...lU. f mpwot. f GNFS.ardlaropnpj.) 8.3 7.0 7.3 7.1 7.0 7.0 7.0 7.2 4.0 7.3 55 GDPit Us dol11reillioo 4.104 3,931 13039 3.564 3,077 4,459 4,004 7.161 15.100 6.179 11,069 2/ N4st b-eosioe a g.-k..ed bythe gora-e.sdtho .B.rk of .. a.od,iq- 9/ Defled a. s.oo y gold,Atole forig. ergdepo.it., h. foreign b0400. sd SORO tIe 1997rosurldebt seechededig .eithds. Bo-k of B,oik lotul ostaender the 14P0Clatiotiv-; te50.-m Ps.H. Club def-orLz sd the opplioslss of ftooditioosl -ebdtdisgs.erls.4.s byseor-Porit Club reditr.. - 39 - Table 13. Mozambique: Selected Economic and Financial Indicators, 1998-2001 1998 1999 2000 2001 Prog. Est. Prog. Rev. Prog. (Annual percentage change, unless otherwise specified) National income and prices Nominal GDP (in billions of meticais) 46,908 52,079 58,887 60,103 68,939 70,178 Nominal GDP (in billions ofU.S. dollars) 3.96 4.10 3.92 3.83 4.20 3.31 Real GDP 12.6 7.5 3.8 2.1 10.4 9.6 GDP percapita (in U.S. dollars) 234 237 222 217 232 183 GDP deflator 2.4 2.0 11.6 13.1 6.0 6.6 Consumer price index (annual average) 0.6 2.9 12.3 12.7 5.7 5.1 Consumer price index (end ofperiod) -1.3 6.2 11.0 11.4 7.0 7.0 External sector Merchandise exports (in U.S. dollars) 6.3 16.0 15.4 28.3 119.0 104.4 Merchandise imports (in U.S. dollars) 7.5 46.8 -3.2 -3.6 1.4 16.8 Temis oftrade (in U.S. dollars) -1.5 1.5 -1.5 1.7 1.5 0.9 Nominal effective exchange rate (end of period) 1/ -3.8 -0.7 -8.2 -10.9 ... ... Real effective exchange rate (end of period) 1/ -7.7 2.0 3.4 2.3 ... ... (Annual change in percent ofbeginning-period broad money, unless otherwise specified) Money and credit Net domestic assets 9.3 23.9 25.0 11.6 13.3 7.4 Ofwhich: netcredit to the govemment -16.0 0.0 12.5 4.1 9.8 2.4 credit to the economy (in percent) 17.8 22.9 26.3 30.1 16.5 19.7 Broad money (M2) 17.6 35.1 34.0 42.4 16.0 19.0 Velocity (GDP/ average M2) 5.7 5.2 4.3 4.2 4.0 3.8 Prime rate (in percent; end ofperiod) 19.6 19.6 18.4 19.6 ... ... (In percent of GDP) Investment and saving Gross domestic investment 23.2 31.8 29.7 29.8 27.3 31.6 Government 9.8 11.5 12.8 13.0 13.1 16.0 Other sectors 13.5 20.3 16.9 16.7 14.2 15.6 Gross national savings 12.2 14.3 12.1 18.2 17.7 15.3 Government 3.1 3.7 9.3 5.1 7.8 4.4 Other sectors 9.1 10.6 2.8 13.1 9.9 10.9 Current account (after grants) -11.0 -17.5 -17.6 -11.6 -9.6 -16.3 Govemment budget Total revenue 11.4 11.9 12.7 12.4 12.3 12.4 Total expenditure and net lending (incl. residual) 21.6 24.6 29.1 27.8 30.0 35.3 Overall balance before grants -10.5 -13.1 -16.7 -15.8 -17.7 -23.0 Totalgrants 8.1 11.7 10.5 IIA 11.5 14.1 Overall balance after grants -2.3 -1.4 -6.2 -4.4 -6.2 -8.9 Domestic prinsay balance -0.6 -3.4 -7.5 -6.5 -7A -10.1 Excluding bank restructuring -0.6 -3.4 -5.2 -4.9 -6.2 -6.2 External fimancing (met. debt relief) 4.6 1.7 3.7 3.6 4.0 7.5 Domestic bank fnancing -2.3 -0.3 2.5 0.8 2.2 IA (In percent of exports of goods and nonfactor services) Net present value oftotal external debt outstanding 2/ 549.1 212.0 163.0 194.4 150.0 113.2 External debt service (nonfinancial public sector). Scheduled, before HIPC Iitiative assistance (Naples tc 20.0 26.1 31.3 25.2 20.2 21.9 Scheduled, after original HIPC nitiative assistance ... 15.3 12.2 5.5 8.2 4.4 Scheduled, after enhanced HIPC Initiative assistance ... ... 4.4 2.5 5.8 2.8 Scheduled, after additional bilateral assistance ... ... ... ... ... 2.7 (In millions of U.S. dollars, unless otherwise specified) External current account aftergrants -435 -718 -690 -443 -403 -538 Overall balance of payments -204 -236 478 -351 -488 -425 Gross international reserves (end of period) 625 670 700 745 634 729 In months of imports of goods and nonfactor services 7.8 5.5 5.7 6.1 5.0 5.5 In percent ofbroad money 88.6 75.6 70.5 76.1 56.8 83.9 Exchange rate (meticais per U.S. dollar; end of period) 12,366 13,300 16,244 17,140 ... ... Use of Fund resources (in millions of SDRs) Purchasesldisbursements 25.2 21.0 45.2 45.2 16.8 8.4 Repurchases/repayments, before IiPC Initiative assista 18.1 22.8 22.2 23.0 21.0 21.0 Credit outstanding 147.2 145.4 168.4 167.6 163.4 155.0 Quota 84.0 113.6 113.6 113.6 113.6 113.6 Sources: Mozambican authorities; and staff estimates and projections. 11Aminus sign indicates depreciation. 2/ Public and publicly guaranteed, in percent of the three-year average of exports. - 40 - Table 14. Mozambique: Nominal and Net Present Value of External Debt Outstanding at End-2000 Legal Situation 2/3/ NPV ofDebt Nominal Debt NPV of Debt After Original HIPC Relief 4/ Millions of Millions of Millions of Percent U.S. Dollars U.S. Dollars U.S. Dollars of Total Total 5,125A 3,350.5 1,208.0 100.0 Multilateral creditors 1,348.2 570.7 546.1 45.2 World Bank 759.3 322.5 322.5 26.7 African Development Bank group 221.2 87.7 87.7 7.3 ofwhich: African Development Bank 1.9 2.0 2.0 0.2 ofwhich: African Development Fund 218.0 84.4 84.4 7.0 of which: Nigeria Trust Fund 1.3 1.2 1.2 0.1 IMF 219.5 85.2 85.2 7.1 European Union 47.6 31.2 13.8 1.1 IFAD 42.4 11.3 11.3 0.9 BADEA 22.7 12.0 12.0 1.0 OPEC Fund 19.1 15.8 8.6 0.7 Nordic Development Fund 12.7 3.3 3.3 0.3 Islamic Development Bank 3.7 1.9 1.9 0.2 Official bilateral creditors 3,630.5 2,635.1 626.2 51.8 Paris Club 2,754.6 2,075.7 534.5 44.2 Pre-cutoff date 2,478.7 1,894.6 379.9 31.4 ODA 145.9 114.2 106.2 8.8 Non-ODA 2,332.8 1,780.4 273.8 22.7 Post-cutoff date 275.9 181.1 154.6 12.8 ODA 86.5 69.7 58.1 4.8 Non-ODA 189.4 111.3 96.5 8.0 Austria . 17.4 14.6 1.7 0.1 Brazil 389.8 301.8 27.0 2.2 France 477.9 393.3 103.4 8.6 Germany 157.9 157.4 43.4 3.6 Italy 483.2 371.2 55.0 4.6 Japan 102.2 109.1 60.0 5.0 Portugal 377.8 301.7 82.1 6.8 Russia 526.8 225.1 138.5 11.5 Spain 16.2 13.8 1.2 0.1 Sweden 8.5 8.4 1.6 0.1 United Kingdom 142.7 128.4 14.0 1.2 United States 54.1 50.7 6.4 0.5 Non-Paris Club 875.8 559.5 91.7 7.6 Algeria 382.0 83.7 27.5 2.3 Angola 45.0 45.0 3.2 0.3 Bulgaria 29.9 29.9 5.9 0.5 China 32.8 26.7 7.0 0.6 FormerYugoslavia 15.4 15.4 7.3 0.6 Hungary 10.6 10.6 0.6 0.0 India 9.8 9.8 2A 0.2 Iraq 74.4 74A 5.8 0.5 Kuwait 27.7 23.4 3.9 0.3 Libya 131.7 124.2 16.3 1.4 Romania 99.7 99.7 8.9 0.7 North Korea 0.5 0.4 0.0 0.0 Poland 16.4 16.4 2.8 0.2 Commercial creditors 146.7 144.6 35.7 3.0 Brazil 122.6 120.8 33.9 2.8 Czech Repubilc 6.7 6.5 1.3 0.1 Portugal 16.5 16.5 0.5 0.0 South Africa 0.9 0.8 0.0 0.0 Sources: Mozambican authorities; and Bank and Fund staff estimates. 1/ Figures are based on data at end-2000. Some data reconciliation is needed for certain creditors. 2/ Does not include the impact of grants disbursed to cover debt service payments to some multilateral creditors. 3/ Reflects the external debt situation as of end-2000, and includes the 1996 Paris Club flow rescheduling on Naples tewnss, and its 1998 amendmentproviding a flow rescheduling on Lyonterns under the original HIPC Initiative. (except for Brazil for which the bilateral agreement to the 1998 amendment had not been signed; this would have lowered the official debt owed to Brazil by US$66.0 million in nominal terms). 41 After full use of traditional debt relief mechanisms, and full delivery of assistance under the original HIPC Initiative. Table 15. Mozambique; Net Present Value of External Debt, 2000-2020 (in millions of U.S. dollars unless otherwise indicated) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020 2000-2010 2011-2020 Actual Estimate Prj6in uter years Averages I. After original HIPC aslsetance I/ 1. NPV ortotaldebt(2+6) 21 1,208.0 1,338.2 1,410.0 1,473.3 1,541.3 1,605.2 1,671.2 1,739.6 1,802.2 1,860.2 1,921.3 2,074.3 1,597.3 2,121.2 2. NPV ofosUtsanding debt (3+4) 1,208.0 1,235.0 1,221.0 1,206.9 1,192.6 1,171.6 1,143.6 1.12&4 1,110.2 1,0909 1,076.5 450.9 1,162.2 856.5 3. Official bilataral and commsercial 661.9 678.9 656.0 638.2 620.8 602.8 584.0 579.7 574.4 567.3 559.5 66.3 611.3 400.2 3a. Paris Club 534.5 551.3 529.0 509.7 492.9 475.5 457.4 454.2 450.3 445.1 438.5 0.0 485.3 301.1 3b. olhier official bilateral 91.7 91.9 92.2 92.9 92.3 91.7 91.1 90.2 890 87.5 86.8 52.0 90.7 73.2 3 35.4 25.9 e. Cormamecial 35.7 35.7 35.7 35.7 35.6 35.6 35.6 35.4 33.2 34,7 34.2 14.3 4. Mltilateral 546.1 556.1 564.1 568.7 571.7 568.8 559.6 548.7 533.8 523,6 517.0 384.6 550.9 436.3 IDA 322.5 331.7 340.7 347.9 353.7 358.3 362.5 365.7 367.8 369.1 367.9 272.7 353.4 328.1 IMF 85.2 85.0 83.1 79.7 75,7 66.9 52.2 36.8 21,0 6.6 0.0 0.0 53.8 0.0 Afirican Development Bank Group 87.7 88.8 89.9 90.8 92.2 94.1 95.9 97.6 99.0 99.9 100.A 88.7 94.2 96.7 Others 50.8 30.3 50.4 50.3 50.1 49.6 49.0 48.5 48.1 47.9 48.7 23.2 49,5 31.3 5. Nomninalstockoftotaldebt 2,258.3 2,492.9 2,626.2 2,746.8 2,866.3 2,976.7 3,079.9 3,195.8 3,307.4 3,418.2 3,329.6 3,917.3 2,954,4 3,915.5 81. After enhanced HlIPC assistance I. NPV ortotal debti(24.6) 21 1,109.0 1,0154.7 1,132.5 1,202.3 1.278.4~' 1,352.1 1,429.3 1,511.1 1,580.3 1,656.2 1,722.7 2,031.3 1,367.1 1,984.2 lb. APP'Vfl tal debt after/all delver,y 31 929.9 1,054.7 1,132.5 1,202.3 1,278.4' 1,352.1 1,429.3 1,511.1 1,589.3 1,656 2 1,722z.7 2,051.3 1,250.8 1,984.2 2. NPV of outstndintgdebt (3+4) 1,109.0 951.5 943.5 935.9 929.7 918.5 901.7 899.9 897.3 886.9 877.9 427.9 932.0 719.5 3. Official bilateral and commercial 661.9 488.5 465.7 446.0 428.0 409.5 390.7 386.9 382.6 377.2 371.4 44.3 437.1 265.8 3a. Paris Club 534.5 403.9 380.9 360.8 343.2 325.2 306.9 303.9 300.6 296.6 291.6 0.0 485.3 301.1 3b, Othe official bilateral 91.7 56.0 56.3 36.8 56.3 55.9 55.4 54,7 53.9 52.8 52.5 32.8 90.7 73.2 3c. Commuercial 35.7 28.3 28.5 28.5 28.5 28.4 28.4 28.3 28.1 27,8 27.3 11.4 35.4 25.9 4. Multilteral 447. 1 463.0 477.8 489.9 501.7 509.0 511.0 513.0 514.8 509.8 506.5 383.6 494.9 453.7 IDA 268.3 280.4 292.8 304.8 316.6 328.3 340.1 352.4 364.9 369.1 367.9 272.7 326.0 328.1 IMF' 70.8 72.7 72.0 70.6 67.8 60.4 47.4 33.7 19.5 6,3 0.0 0.0 47.5 0.0 Afiican Development Bank 68.7 70.0 73.2 75.6 78.5 81.9 85.5 89.2 93.0 97.0 100.4 88.7 83.1 96.7 Other 39.2 39.0 38.9 38.8 38.8 38.4 38.0 37.7 37.4 37.3 38.2 22.2 38.3 28.9 5. Nlominalstockoftotaldebt 2,177.6 2,142.2 2,280.3 2,407.3 2,334.6 2,653.7 2,766.6 2,893.7 3,018.5 3,137.6 3,255.3 3,889.0 2,600.7 3,724.4 Ill. After bilateral debt relief beyond HIPC asnistance 41 1. NPV oftotal debt (2+6)2V 1,109.0 915.7 998.6 1,073.4 1,154.6 1,233.4 1,315.0 1,398.0 1,476.7 1,544.4 1,611.8 2,131.4 1,257.4 1,920.4 lb. NPVof inial debt afterfish delivery 31 792.0 915.7 998,6 1,073.4 1,154.6 1,233.4 1,315.9 1,399.0 1,476.7 1,544.4 1,611.8 2,131.4 1,228.6 1,920.4 2. NPV ofotilstanding debt (3+4) 1,109. 812.5 809.6 807.0 805.8 799.7 786.3 786.8 784.7 775,1 766.9 507.9 822.3 655.7 3. Officialtbiateral anid omumercial 661.9 349.5 331.7 317.1 304.1 290.8 277.2 273.8 270.0 265.3 260.5 124.3 327.4 202.0 3a. Panis Club 534.5 264.0 247.0 231.9 239.4 200.5 193.5 190.8 188.0 184.7 180.7 80.1 240.2 136.3 3b. Othr ofricial bilatera 91.7 56.0 56.3 56.8 56.3 55.9 55.4 54,7 53.9 52.8 52.5 32.8 58.4 45.0 Sc. Commuercial 35.7 28.5 28.5 28.5 28.5 28.4 28.4 28.3 28.1 27.8 27.3 11.4 28.9 20.7 4. Multiateral 447.1 463.0 477.8 489.9 301.7 509.0 511.0 513.0 514.8 509.8 506.5 3813.6 494.9 453.7 IDA 268.3 280.4 292,8 304.8 316.6 328.3 340.1 352.4 364.9 369.1 367.9 272.7 326.0 328.1 IMF 70.8 72.7 72.9 70.6 67.8 60.4 47.4 33.7 195 6.3 0.0 0.0 47.5 0.0 AfricanLDevelopment Bank 68.7 70.0 73.2 75.6 78.5 81.9 83.5 89.2 93.0 97.0 100.4 88.7 83 1 96)7 Others 39.2 39.0 38.9 38.8 38.8 38.4 38.0 37.7 37.4 37.3 38.2 22.2 38.3 28.9 5. N4orninalstockoftotal debt 2,177.6 1,978.0 2,121.4 2,253.7 2,306.2 2,510.7 2,629.2 2,756.9 2,882.4 3,002.4 3,121.4 4,012.6 2,520.1 3,652.8 Melssrandaaz Items;a 6. N4PVofnew borrowing.. 103.2 189.0 266.4 348.8 433.6 527.6 611.2 692.0 769.3 844.8 1,623.4 478.6 1,264.7 Official bilatcral .. 8.6 17.5 18.3 19.0 19.9 20.8 20.7 19.7 18.6 17.4 2.8 18.0 9.9 Mufltilateral . 94.6 171.~5 248.1 329.7 413.8 506.8 390.3 672.3 750.7 827.4 1,620.6 460.6 1,254.6 Sources: Mozambican authorities, and Bank and Pond staff estimates and projections. 11Refers to public and publicly guaranteed extemsal debt only and assumses a stock-of-debt operation on Ntaples terms (67 prrcent NPV reduction) at the end of 1998. and at least comparable action by other officia bilateral creditors. includes a flow rescheduling under Lynn trnns. Also assumes a Lyon stock deal in July 1999. 2/ Discounted on the basis of the average commnercial interest reference rate for the respective currency, derived over the six-month period prier to the latest date for wluch actual data are avaiable (December 2000). The conversion of currency-specific NPVs into 13.S. dollars occurs for all year at the base date (Dmeember 31. 2000) exchange rate. 31 NPV of Itel debt assuming the entire H4IPC Initiative assistaoce is fully delivered as of end-2000. 4/ After debt relief beyond HIPC offered by somne of the Paris Club creditors. Table 16. Muzmmbique: Exteral Debt Indicators, 2001-2020 1/ (orpececkt, .od- o4tehio. idic-t-d) 2001 2002 2003 2004 2005 2006 2007 2000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 2000-2010 2011-2020 Ate.r o--8. l illFtP noiltlnce S/ NPVofdobttoGDP tio 40.4 39.6 37.0 34.6 33.0 31.8 30.6 29.3 28.0 26.8 25.7 24.4 23.1 21.9 208 19.6 18.5 17.4 14.4 13.7 13.7 33.1 20.0 NPV ofd 46 to porb ,tio 3/4/ 166.3 143.4 129.8 102.0 79.5 64.6 61.3 600 59.6 55.7 53.0 50.3 50.2 49.8 49.4 488 48.0 469 40.2 39.5 39 5 92.2 47.6 N!PVofdebttoeovenoeti.o5/ 327.3 29806 260.0 232.8 215.0 202.3 191.1 180.5 169.9 160.2 151.1 1419 133.1 124.5 116.6 109.1 101.9 948 77.6 73.1 73.1 223.8 112.4 iDebt wrvie mtio 4.4 8.6 83 4.5 4.0 3.9 3.6 3.7 3.7 3.1 3.1 3.4 3.5 3.5 3.4 3.4 3.5 3.5 3.3 3.5 3.5 4.8 35 NVebt -6et. enueo too.8t5/ 11.1 20.7 17.3 14.9 14.2 13.7 11.6 11.6 11.1 10.2 9.6 9.9 9.5 9.1 84 8.O 7.6 7.4 7.1 6.8 6.8 13.7 8.3 Altor e hbnoed HIPC .000605co NPVofdebttoGDP tbo 31.9 31.8 302 28.7 27.8 27.2 26.6 25.9 25.0 24.1 23.2 22.2 21.1 20.1 19.2 18.3 17.4 16.4 14.2 13.6 13.6 27.9 18.6 NPVofdebtto.s o,p3rtsio314 131.0 115.2 105.9 8.6 67.0 55.3 53.2 52.9 53.1 49.9 47.8 45.7 45.8 45.8 45.6 45,4 44.9 44.2 39.6 391 391 76.8 44.4 NPVofdebltoe.expbeti.o(eoingdebtonly) 118.2 96.0 .82.4 .-61.5 45.5 34.9 31.7 29.9 28.4 3 25.4 23.2 21.2 20.2 19.0 17.9 16.7 15.4 14.0 9.0 8.1 81 55.4 16.5 soffo qfterJ¶dJ NPV of debtr, r.sorta ddeoli,oyb00031417/ 131.0 115.2 105.9 84.6 67.0 55.3 53.2 52.9 53.1 49.9 47.8 45.7 45.8 45.8 45.6 45.4 44.9 44.2 39.6 39.1 39.1 76.8 44.4 NPVofdebttoevoeon. tio5/ 2580 239.8 212.2 193.1 181.1 173.0 1660 159.2 151.3 143.6 136.3 128.9 121.6 114.4 107.8 10.0 95.5 89.4 76.6 72.3 72.3 187.7 104.4 Dbt rertt tio 2.8 6.2 6.0 3.2 2.9 2.9 2.5 26 2.9 2.5 2.6 2.9 3,0 3.0 2.9 2.9 2.9 3.0 3.0 3.0 3.0 34 2.9 Nebt .,kevtoe.or.-er6ti35/ 75 14.9 12.5 10.6 10.2 10.0 8.1 8.2 8.7 8.3 8.0 83 81 7.7 71 6.7 6.4 63 60 5.8 5.8 9.9 7.0 After W.I.. d.bt reIef beyond FPC mhintnae 6f NPVofdbt t.GODP tii 27.7 28.0 27.0 25.9 25.4 25.0 24.6 24.0 23.3 22.5 21.7 20.9 20.0 19.1 1.2 17.4 16.6 15.8 14.9 14.1 14.1 25.3 17.9 NPVofdebtt.o-ub 8rO io3/4/ 113.8 101.6 94.5 76.4 61.1 50.9 49.3 49.2 49.5 46.7 44.9 430 43.3 43.3 43.3 43.2 42.9 42.3 416 40.6 40.6 69.3 42.8 4I NVPV l ofd.bttu ,o ,uojio W7 fi,f,lSU IN dd-l W ,20003ntO 41 / 113.8 101.6 94.5 76.4 61.1 50.9 49.3 49.2 49.5 467 44.9 43.0 43.3 43.3 43.3 43.2 42.9 42.3 41.6 40.6 40.6 69.3 42.8 NPVofd.bttoreveruteratio5/ 224.0 211.5 189.4 174.4 165.2 159.3 153.6 147.9 1411 134.4 128.0 121.3 114.7 108.3 102.3 966 91.2 85.6 60.3 75.1 75.1 170.1 100.3 D.bt mevi, tio 2.7 5.2 5.0 2.7 2.5 2.5 2.3 2.4 2.8 2.4 2.4 2.7 2.8 2.8 2.8 2.7 2.7 2.8 2.8 2.8 2.8 3.0 2.0 Debt -sie. to ener'- .tio5/ 7.2 12.5 10.5 9.0 8.8 8.7 7.5 7.7 8.2 7.8 7.5 7.8 7.6 7.3 6.8 6.3 6.0 5.9 5.7 5.4 5.4 8.8 6.6 Deboorenkerohooae.iolingb,-geproj.c 5.1 10.9 10.2 9.6 9.7 9.8 8.2 8.1 9.1 8.9 8.6 9.1 8.9 8.5 7.9 7.4 7.0 6.9 6.6 6.3 6.3 9.0 7.7 Mmoradum lIe...: NPVofdebt. eenh-neod HIPC.. -cmo m ioniofUSdo.11) 1,055 1,133 1,202 1,278 1,352 1,429 1,511 1,589 1,656 1,723 1,790 1,847 1,900 1,950 2,002 2,034 2,104 2,144 1,998 2,051 2,031 1393 1,984 iDbt cafler menoed HIPCanubneo Cm mllioofUS don) 30 71 71 70 76 83 74 82 96 100 104 119 126 132 133 136 140 131 158 164 164 75 136 OD3P 3,309 3.564 3,977 4,459 4.864 5,263 5,689 6,145 6.635 7,161 7,726 8,333 8,985 9,686 10,437 11,244 12,109 13,037 14,033 15,100 15,100 5,107 11,069 C.po-t of0 oodau4.e.vcoo3/ 1,081 1,136 1,189 2,207 2,661 2,890 2,62 3,158 3,245 3,951 4,041 4,140 4,255 4,388 4,523 4,673 4,846 5,034 5,242 5,479 5,479 2,448 4,662 Enpo.euofgoo4n.od rviO (3-y-y.mvo vg)3/ 805 693 1,135 1,511 2,019 2,586 2,838 3,003 3,122 3,451 3,745 4,044 4,145 4,261 4,389 4,528 4,681 4,851 5,041 5,252 5,252 2,145 4,494 l3averrmnonteveno35/ 409 472 567 662 747 826 910 996 1,095 1,199 1,313 1,433 1,563 1,704 1,858 2,024 2,204 2,398 2,610 2,838 2,838 788 1,994 Source. M84oaobiDno.th idoer, and B.ok nd Fooddtfferlee. I/ An debt ndol other-e dientod cdoato refer to pbili mnd publidy guemmteed (PP9) debt mtd oce defined fota tonclednlru-, 2/ R.OeOa hypothdtico toek-of-debt op-tnth on Nopoa termn. en ed-1998 fo Potit Club oreditr . nalattdtn thlHCISecond Diion ibo Pomt Domment (E/00/62) Itmlided" .oo roorledlingoode. Lyom tleo a-d Lyom dtock dent io Juy 1999. 31/Adosidin I6m, OMF,omme oPo M-a, 5th edibon, 1993. omoen 4/ Banedone t -yene rver4e,of opo on fne.probe.i yeor (e.8. cpor ovemopeover 1999-41 forNPV of dobt-to.-expo ..rdo in 2001) t 5/ Revenue goo nmt ro, execIding Uonmt isddfeed . ceno.trl 6/ SomePr. Club..ed.to bo.v eujeed to ddiotd debt -eeef ,nd byond HIPC -ibot-ce. 7/ Aon-nig hM0dd-ely of HIPC tooe 01eod-2000. Tablel17. Mozambique: Extemnal Debt Service A-fter Full Implementation of Debt-Relief Mechanisma,2001-2020 2001 2002 2003 2004 2003 2006 2007 2008 2009 200 2020 2001-2010 2011-2020 Estimate OtryasAea Total debt sers4.e after originsalHlPC iaisistanctui 45.6 93.8 93.0 92.2 97.9 103.6 89.1 91.3 91.4 85.3 116.2 88.3 101.9 Multilatral 22.9 25.4 29.3 31.1 37.3 43.4 44.6 45.8 44.4 37.9 43.6 36.2 41.4 Of which IDSA 10.4 11.2 13.6 15.4 16.9 17.7 18.8 20.2 21.1 23.7 33.0 16.9 30.1 IMF 3.3 7.1 8.5 8.8 13.5 18.7 18.3 18.1 15.7 7.0 0.0 12.1 0.0 African Development Bank 3.5 3.6 3.9 3.5 3.0 3.2 3.6 3.9 4.5 5.0 7.7 3.8 6.7 Othes 36 3.5 3.4 3.4 3.8 3.8 3.6 3.6 3.2 2.3 2.9 3.4 4.7 Official bilateral 20 1 63.8 61.1 38.5 38.0 57.6 41.8 42.7 44.0 44.3 67.7 49.4 56.4 Paris Club 11.3 57.2 32.7 48.9 48.4 48. 31.9 32.4 33.4 34.3 51,7 39.8 43.7 Of which: Official Development Asistance 4.1 16.7 15.3 14.4 14.0 13.2 8.6 8.1 8.0 7.9 7.5 11.0 8.3 Other offi.cial biatenal 8.8 8.7 8.4 9.6 9.6 9.6 10.0 10.3 10.7 9.8 16.0 9.6 12.8 Ofsehichk Official Developmrrt Aosstance 0.7 0.7 0.7 1.7 1.7 1.7 1.7 1.7 1.7 0.7 1.3 1.3 0.9 Commercial 2.6 2.6 2.6 2.6 2.6 2.6 2.7 2.8 2.9 3.1 4.9 2.7 4.0 Total debt service afterenhanced tJPC assaWface 2/ 28 2 66.7 65.7 63.8 68.3 73.1 37.0 37.6 65.3 63.3 86.4 60.9 76.7 MulbIateral 10.9 12.9 16.6 17.6 22.8 28.5 28.71 20.0 35.8 33.9 43.4 23.7 40.3 Ofwhich IDA 4.3 4.6 3.8 6.8 7.6 8.2 8.3 8.9 18.0 23.7 33.0 9.6 30.1 IMF 2.4 4.2 6.7 7.1 11.6 16.7 16.5 16.3 14.3 6.7 0,0 10.3 0.0 AfiicansfDevelopmentBansk 1.4 1.4 1.4 1.1 0.8 0.8 0.9 1.0 1.1 1.9 7.7 1.2 6.7 Others 2.8 2.7 2.6 2.6 2.9 2.9 2.8 2.7 2.4 1.5 2.7 2.6 3.5 Offcid3 bilateral 14.8 51.7 47.1 44.2 43.4 42.5 26.2 26.4 27.1 27.0 39.0 35.0 33.2 Pamis Club 9.3 48.1 43.6 39.7 39.0 38.1 21.6 21.7 22.3 23.0 32.4 30.7 28.0 Of which: Offcia Development Asistance 7.7 0.0 4.0 16.7 15.3 14.4 14.0 13.2 8.6 8.1 8.9 10.2 7.8 Odwhorocl labilaleral 5.4 3.7 3.5 4.4 4.4 4.4 4.5 4.7 4.8 4.0 6.6 4.4 5.2 . Of which: OffleiaDevelopmsent Asistance 0.7 0.5 0.5 1.2 1.2 1.2 1.2 1.2 1.2 0.5 0.9 0.9 0.6 Commercia 2.5 2.1 2.1 2.1 2.1 2.1 2.2 2.2 2.3 2.4 3.9 22 3.2 Total debt service after bilateral debt relief beyond HII'C 31 27.3 55.1 34.5 52.8 57.5 62.4 51.7 52.1 59.6 57.4 768 53.0 69.1 Multilalersl 10.9 12.9 16.6 17.6 22.8 28.5 28.7 29.0 35.8 33.9 43.4 23.7 40.3 Official blateral 13.8 40.1 35.8 33.2 32.7 31.9 20.8 20.9 21.4 21.1 29.4 27.2 25.7 Paris club 8.4 36.5 32.3 28.8 28.3 27.5 16.3 16.2 16.6 17.1 22.9 22.8 20.5 Of whAc Offlcialllevelopmsent Assistance 3.9 14.9 13.5 12.6 12.2 11.5 7.4 6.8 6.7 6.6 5.4 9.6 6.4 Other official bilatera 5.4 3.7 3.5 4.4 4.4 4.4 4.5 4.7 4.8 4.0 6.6 4.4 5.2 Commercia 2.5 2.1 2.1 2.1 2.1 2.1 2.2 2.2 2.3 2.4 3.9 2.2 3.2 Memiorandums items: Debt service of new debt 2.3 3.8 5.2 6.6 8.0 9.6 16.8 24.5 30.2 36.5 77.6 14.3 59.5 MuilWateral 2.2 3.6 4.9 6.4 7.7 9.3 15 5 22.3 28.0 34.3 73.6 13.4 57.4 IDA 0.9 1.9 3.1 4.1 5.1 6.0 6.8 7.8 8.7 9.7 42.0 5.4 26.6 IMF 0.1 0.2 0.3 0.4 0.5 0.6 2.7 6.9 11.0 15.0 0.0 3.7 8.0 Afncan Development Bank 0.6 0.7 0.7 0.8 0.8 1.0 1.3 1.5 1.7 1.9 8.3 1.1 5.3 Other 0.6 0.9 0.9 1.1 1.3 1.8 4.8 6.2 6.6 7.7 25.4 3.2 17.5 Ofrlimal bilatcr 0.1 0.2 0.2 0.2 0.2 0.2 1.2 22 2.2 2.2 20 0.9 2.1 HIPO relief NomMina Under the original HIPC Iniutative 98.9 92.8 95.3 90.3 96.1 90.8 88.8 88.0 86.2 101.6 146.5 93.5 133.4 UJnder theeanhmuced HIPCnImtiasiv 17.4 27.1 27.3 28.4 29.6 30.5 32.1 33.7 26.1 22.0 29.9 27.4 25.2 Sources: Mozambican authorities; and Bank and Fund staff estimates and projectiona. 1/ Assmnes a stock-of-debt operation under Naples terms at end-December 1998 for Pari Club creditors and full delivery of original HIPC assistance. 2/ Include debt rehief from original HtpC Initiative. 3/ After debt relief beyond H4IPCoffered by somneof the Paris Club creditors. Table 18. Mozambique: Comparison of Net Present Value of Extemal Public Debt Between Decision Point and Completion Point (In rmillions of U.S. dollars, unless othcrwise indicated) Stock at End-2000 Decision Point DSA Amended (Projection) 1/ Decision Point Completion Point DSA 21 After After After After After Additional Original Enhanced After Enhanced Original Enhanced Bilateral HIPC relief IIIPC Relief HIPC Relief HIIPC relief IHIIPC Relief Relief 3/ NPVofdebtusingend-1998parameters 1,162 896 1,027 1,396 1,080 927 Multilateral 524 425 515 656 544 544 Official bilateral and commercial 638 471 512 740 537 383 NPV of debt using end-2000 parameters ... ... ... 1,208 930 792 Multilateral ... ... ... 546 447 447 Official bilateral and commercial ... ... ... 662 483 345 NPV of debt to exports ratio (in percent) 4/ Using end-1998 paraineters 212.1 163.4 224.6 173.9 149.1 Using end-2000 parameters ... ... 194.4 149.6 127.4 Memorandum items: NPV of enhanced 131PC assistance 5/ Using end-1998 parameters 6/ ... 267 ... 315 ... Using end-2000 parameters ... ... ... 278 Exports of goods and services 7/ Decision point 548 548 ... ... ... Completion point ... ... 621 621 621 Sources: Mozainbican authorities; and Bank/Fund staff estimates. 1/ Debt sustainability analysis (DSA) based on stock of debt reconciled as of end-1998, assuming full (hypothetical) delivery of enhanced HIPC assistance. 2/ Based on stock of debt reconciled as of end-2000, assuming full (hypothetical) delivery of enhanced HPC assistance. 3/ After debt relief beyond HIPC offered by some of the Paris Club creditors. 4/ Based on the average of three consecutive years of exports of goods and services ending in the current year. The NPV includes a portion of IDA relief delivered through a US$150 million IDA grant. 5/Thbe value of assistance under the enhanced HIPC framework was determined at its March 2000 decision point, namely US$254 million in using end-I 998 parameters (exchange rates and discount factors). The corresponding values for enhanced HIPC relief expressed as of end-2000 are provided for information only. 6/ The estimate of US$338 million expresses the value of the agreed assistance (US$254 mnillion in NPV terms of February 2000) in NPV 7/ Average of three consecutive years of exports of goods and services ending in the current year. Data and projections at the time of the decision and completion points under the enhanced HIPC framework. Table 19. Mozambique: Sensitivity Analysis, 2000-2020 1/ 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2020 2001-2010 2011-2020 Estimates Outer years Averages Baseline scenario NPVofdebttoexportsratio 3/ 131.0 115.2 105.9 84.6 67.0 55.3 53.2 52.9 53.1 49.9 39.1 76.8 44.4 Debt serviceto exports ratio 3/ 2.8 6.2 6.0 3.2 2.9 2.9 2.5 2.6 2.9 2.5 3.0 3.4 2.9 Debt service to revenue ratio 4/ 7.5 14.9 12.5 10.6 10.2 10.0 8.1 8.2 8.7 8.3 5.8 9.9 7.0 Grantelementintotaldebt 50.8 50.3 50.1 49.6 49.0 48.3 47.8 47.3 47.2 47.1 47.3 48.8 46.7 Grantelemnentinrnew debt 60.3 58.6 58.1 57.3 56.5 55.1 54.7 54.4 54.3 54.1 50.4 56.3 52.4 Alternative scenario - Lower growth 2/ NPVofdebttoexportsratio 3/, 131.0 117.2 110.6 101.0 87.1 76.0 75.3 78.5 81.5 80.1 77.7 93.8 80.7 Debtservicetoexportsratio 3/ 2.8 6.3 6.2 4.1 3.6 3.7 3.3 3.7 4.3 3.9 6.1 4.2 5.3 Debtservicetorevenueratio4/ 7.5 15.2 13.1 11.5 11.4 11.5 9.7 10.2 11.2 11.6 12.4 11.3 12.3 Grantelementintotaldebt 50.8 50.4 49.9 49.1 48.3 47.8 47.2 46.6 46.3 46.1 45.3 48.2 45.2 Grantelement in new debt 60.3 5S.2 56.7 54.8 53.2 52.5 52.0 51.3 50.8 50.5 47.0 54.0 48.5 Altemative scenario -Lower project grants 5/ 4- NPVofdebttoexportsratio 3/ 131.0 115.2 105.9 85.8 69.2 58.0 57.9 60.0 63.0 62.6 92.5 80.9 79.6 1 Debtservicetoexportsratio 3/ 2.8 6.2 6.0 3.2 2.9 2.9 2.6 2.7 3.1 2.8 6.2 3.5 4.5 Debtservicetorevenueratio4/ 7.5 14.9 12.5 10.7 10.3 10.2 8.4 8.6 9.3 9.2 11.9 10.2 10.6 Grantelementintotaldebt 50.8 50.3 50.1 49.4 48.8 47.9 47.0 46.2 45.6 45.0 38.2 48.1 41.0 Grantelcmentinnewdebt 60.3 58.6 58.1 56.6 55.2 53.6 52.3 51.1 50.0 48.9 38.9 54.5 43.0 Sources: Mozambican authorities; and Bank and Fund staff estimates. 1/ Including new debt. 2/ Growth of real GDP is assumed at 4 percent per year from 2000 onwards, instead of 6.3 percent in the baseline. Export and import volumne have been lowered, consistently with the lower GDP growth. 3/ As defined in IMF, Balance of Payments Manual, 5th edition, 1993. Based on a three-year average of exports on the previous year (e.g., export average over 1999-01 for NPV of debt-to-exports ratio in 2001). 4/ Revenue is defuned as central govemnment revenue, excluding grants. 5/ The share of grants in external project financing declines gradualy from 60 percent in 2000 to 50 percent in 2010. - 46 - Table 20. HIPC Initiative: Status of Country Cases Considered Under the Initiative, August, 2001 Target Estimated Total NPV ofDebt-to- Assistance Levels 1/ Percentage Nominal Debt Decision Completion Gov. (In millions of U.S. dolars, present value) Reduction Service Relief Country Point Point Export revenue Total Bilat- Multi- IMEF World in NPV of (In millions of (in percent) eral lateral Bank Debt 2' U.S. dollars) Completion point reached under enhanced framework BolMvia 1,302 425 876 84 194 2,060 originalframework Sep. 97 Sep. 98 225 448 157 291 29 54 14 760 enhancedframework Feb. 00 Jun. 01 150 854 268 585 55 140 30 1,300 Uganda 1,003 183 820 160 517 1,950 originalframework Apr. 97 Apr. 98 202 347 73 274 69 160 20 650 enhancedframework Feb. 00 May 00 150 656 110 546 91 357 37 1,300 Decision point reached under enhanced framework Benin JuL. 00 Flosting 150 265 77 189 24 84 31 460 Burkina Faso 398 56 342 42 162 700 originalfromework Sep. 97 JYI. 00 205 229 32 196 22 91 27 400 enhancedframework Jul. 00 Floating 150 169 24 146 20 71 27 300 Cameroon Oct. 00 Floating 150 1,260 874 324 37 179 27 2,00D Chad May. 01 Floating 150 170 35 134 18 68 30 260 Gambia, The Dec. 00 Floating 150 67 17 49 2 22 27 90 Guinea Dec. 00 Floating 150 545 215 328 31 152 32 S00 Guinea-Bissau Dec. 00 Floating 150 416 212 204 12 93 85 790 Guyana 585 220 365 74 68 1,030 originalframework Dec. 97 MWay99 107 280 256 91 165 35 27 24 440 enhancedfframework Nov. 00 Floating 150 250 329 129 200 40 41 40 590 Honduras Jun. 00 Floating 110 250 556 215 340 30 98 18 900 Madagascar Dec. 00 Floating 150 814 457 357 22 252 40 1,500 Malawi Dec. 00 Floating 150 643 163 480 30 331 44 1,000 Mali 523 162 361 58 182 870 originalframework Sep. 98 Sep. 00 200 121 37 84 14 44 9 220 enhancedframework Sep. 00 Floating 150 401 124 277 44 138 28 650 Mauritania Feb. 00 Floating 137 250 622 261 361 47 100 50 1,100 Mozambique 1,970 1,235 736 140 434 4,300 originalframework Apr. 98 Jun. 99 200 1,716 1,076 641 125 381 63 3,700 enhancedframework Apr. 00 Floating 150 254 159 95 16 53 9 600 Nicaragua Dec. 00 Floating 150 3,267 2,145 1,123 82 189 72 4,500 Niger Dec. 00 Floating 150 521 211 309 28 170 54 900 Rwanda Dec. 00 Floating 150 452 56 397 44 228 71 800 Sao Tome & Principe Dec. 00 Floating 150 97 29 68 - 24 83 200 Senegal Jun. 00 Floating 133 250 488 193 259 45 124 19 S50 Tanzania Apr. 00 Floating 150 2,026 1,006 1,020 120 695 54 3,000 Zambia Dec. 00 Floating 150 2,499 1,168 1,331 602 493 63 3,820 Decision point reached under original franework Cote divoire Mar. 98 Mar. 01 141 280 345 163 182 23 91 6 3/ 800 Total assistance provided/committed 20,833 9,779 18,955 1,755 4/ 4,951 34,680 Prelimmiary HIPC documnent issued 5/ Ethiopia ... ... 150 1,028 352 649 37 395 42 1,650 Ghana ... ... 250 2,096 1,002 1,095 122 767 55 3,200 Sierra Leone ... ... 150 551 188 326 121 119 79 867 Sources: IMF and World Bank Board decisions, completion point documents, decision point documents, preliminary HIPC documents, and staff calculations. I/ Assistance levels are at countries' respective decision or completion points, as applicable. 21 In percent of the net use of traditional debt-relief mechanisms. present value of debt at the decision or completion point (as applicable), after the full 3/ Nonreschedulable debt to non-Paris Club official bilateral creditors and the London Club, which was already subject to a highiy concessional restructuring, is excluded from the NPVof debt at the completion point in the calculation of this ratio. 4/ Equivalent to SDR 1,386 million at an SDR/USD exchange rate of 0.7900, of May 1, 2001. 5/ Figures are based on preliminary assessments at the time of the issuance of the preliminary HIPC document, and are subject to change. - 47 - Chart 1. Mozambique: Sensitivity Analysis, 1998 - 2020 1/ NPV of Debt to Exports (in percent) 220 A Lower growth -n- Lower project grants 170 --------- -.- ---- 170~~~~~~~~~~~~~- ---- --- --- -- --- -- .--.--- - . ---- ..---.- - -- ----- -- -- --- ----- --.. ..... . ---- ---- - ........... --- 120 70 20 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 External Debt Service / Exports (in percent) 20 - Baseline - Lower growth 15 - - Lower project grants 10 5 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 25 External Debt Service / Revenue (in percent) >~~~~~~~~~~~~~~~~ Baseiine 20 -\A Lower growth --- Lower project grants 15 10 5 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Mozambican authorities and staff estimates. 1/ Debt service indicators under diffe~rent scenarios assuming full delivery of enhanced HIPC but before additional bilateral relief. - 48 - ANNEX Mozambique: Debt Management Institutional framework Debt management is the responsibility of the Ministry of Planning and Finance in Mozambique. Public or publicly guaranteed debt can only be contracted with the approval of the Ministry. The Ministry maintains the database for multilateral debt while the Bank of Mozambique maintains the database for bilateral debt. Coordination between the two agencies is good. Efforts are being made to strengthen the capacity within the Ministry so that all monitoring of public debt can be united within the Ministry at a later date. Debt recording and reporting Monitoring of recently acquired public and publicly-guaranteed debt has been good. The authorities have made a concerted effort to reconcile data on older debts with creditors and, with a few minor exceptions, this process has now been completed. This data is maintained using the Commonwealth Secretariat database system CS-DRMS. The database is generally up-to-date and is regularly maintained by both the Ministry of Planning and Finance and the central bank. However, the current system is not able to produce data directly in an analytical form. The Bank of Mozambique is in the process of establishing a computerized database to track external private sector debt stocks (currently comprehensive information on stocks is only available in hard copy although information on a few large private projects has been monitored more closely). Flows related to private sector debt and its repayment are already relatively well monitored by the Bank of Mozambique. Analytical capacity The technical staff at both the Ministry of Finance and the Bank of Mozambique are experienced and knowledgeable about debt issues and have carried out numerous debt restructuring negotiations. There is more limited capacity within the debt teams to integrate debt and macroeconomic simulations and these have tended to be produced in conjunction with the Bank and the Fund.
Группа Всемирного банка · Completion Point Document
Mozambique - Assistance under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative
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Основные сведения
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Completion Point Document
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Мозамбик
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Всемирный банк