International Bank for Reconstruction and Development
                               International Development Association
                                                                                                                           86868
                                  International Finance Corporation
                             Multilateral Investment Guarantee Agency
                                                  FOR OFFICIAL USE ONLY
                                                  CONFIDENTIAL
                                                                                                                               EDS97-490
                                                                                                                         December 18, 1997


    Board Meeting of December 18, 1997
    Statement by Andrei Bugrov

                                       Mozambique - Country Assistance Strategy

           1. Since the last CAS discussion Mozambique has achieved remarkable progress in its
    macroeconomics stabilization and the transition to a market economy. These achievements,
    combined with impressive strides to peace and democracy, have translated into an economic
    recovery characterized by the rapid growth of GDP and export.

            2. Notwithstanding the commendable economic performance over the recent years,
    Mozambique remains among the poorest countries in the world. Its social indicators are worse
    than the Sub-Saharan African averages. Its considerable economic potential, which includes
    arable land, forests, minerals, water resources, etc. remains relatively untapped. Thus, the
    development challenges facing Mozambique are still enormous.

            3. We are in a broad agreement with the Bank’'s analysis of the economic situation and
    the assessment of the problems facing Mozambique. However, we would like to underscore
    three challenges which, in our view, deserve more focused attention:

              •    Local capacity building. As a result of Mozambique’s dramatic history, human
                   resource constraints and institutional capacity constraints are extremely pressing and
                   will remain so for quite a while.

              •    Development of the domestic private sector. Growth which is led by foreign private
                   sector can not be sustainable either in economic or in socio-political terms.

              •    Drought and flood mitigation. Mozambique’s exports and growth are highly
                   vulnerable to adverse weather conditions. The poor in rural areas are particularly
                   vulnerable.




The electronic version of the document is provided for convenience. (The official record is the version printed by the Corporate
Secretariat). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its
contents may not otherwise be disclosed without the consent of the Executive Director concerned.
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            4. We are pleased to note that the working relationship between the Bank and the
     Government has improved. We also appreciate very candid discussion on the remaining areas of
     disagreements and tensions. The importance of further strengthening of the Bank/Government
     partnership and mutual understanding for the successful implementation of the agreed CAS
     agenda cannot be overstated.

              5. It is also important to create a stronger partnership with civil society, including NGOs.
     The CAS describes various Bank activities in this respect. However, the recent events and a
     letter from the Mozambican Debt Group to the Executive Directors indicate that more work is
     needed on this front.

             6. We endorse the proposed CAS for Mozambique and its strategic priorities. We support
     the suggested Bank approach to lending and non-lending assistance. In particular, we welcome
     the intention to extend IDA investments beyond urban areas and especially into the center and
     the north of the country where the majority of the poor live.




The electronic version of the document is provided for convenience. (The official record is the version printed by the Corporate
Secretariat). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its
contents may not otherwise be disclosed without the consent of the Executive Director concerned.