Debt relief improved

Mozambique's debt service payments have been cut by US $41 million per year - US $28 million more than expected - under
a debt relief initiative announced by the International Monetary Fund (IMF) and World Bank, the debt pressure group Jubilee 2000 said in a report this week.

"This year Mozambique's debt service payments will be 17 percent of the government budget and will be larger than spending on health," the report said. "By 2001, however, debt service payments will be down to 11 percent of the budget and will be similar to government spending on health."

The "unexpectedly generous deal" under the Highly Indebted Poor County (HIPC) initiative announced by the IMF and World Bank on 30 June is a result of "the focus on Mozambique over the last two years," John Garrett of Jubilee 2000 told IRIN on Wednesday. "Debt campaigners and the Mozambican government have made their mark. Gradually the World Bank and the IMF have started to react to that."

Under the original HIPC computations made in April, Mozambique stood to save just US $13 million a year on debt payments to Paris Club creditors in a country where 70 percent of the population live in poverty. Garrett described the new proposal, ostensibly based on corrected projections by the IMF, as "broadly positive". But he added that "increased conditions
have been attached to debt relief under the offer and it is highly questionable whether they are to the benefit of Mozambicans."

These include the controversial World Bank decision that Mozambique's collapsed cashew nut processing industry, formerly the country's largest employer, should not be rescued by the government through an export tax on unprocessed nuts. The IMF is also opposed to a "supply-driven model" in the government's plans for rural water and sanitation, to one that emphasises "cost recovery and the private sector."

According to Jubilee 2000, this means that "the government must stop giving clean water to those who need it and only give it to those who can afford to pay a private company."