Outlook for 2011-12

• The ruling party, Frente de Libertação de Moçambique (Frelimo), is set to remain hegemonic in 2011-12, but there is a risk of internal splits emerging as candidates to succeed Armando Guebuza as president in 2014 emerge.
• The risk of widespread social unrest, particularly in poor urban areas, cannot be discounted, particularly given the outlook for sharp rises in global food prices in 2011.
• Policy will be guided by the three-year policy support instrument with the IMF and the five-year strategy paper, Programa Quinquenal do Governo para 2010-14. Both target poverty reduction and economic diversification.
• The fiscal deficit in 2011 is forecast at the equivalent of 5% of GDP, falling to 4.4% of GDP in 2012 as subsidies are unwound. The deficit will be funded overwhelmingly by concessional loans from donors.
• Real GDP growth is expected to remain brisk in 2011-12, averaging 7.4% a year, on the back of increasing inflows of foreign aid and foreign direct investment into minerals and infrastructure mega-projects.
• In line with the latest outlook for global commodity prices and expected losses to local agricultural output resulting from flooding, inflation is now forecast to average 7.5% in 2011, before easing to 5% in 2012.
• The current-account deficit is forecast to narrow from an estimated 11.9% of GDP in 2010 to 11.2% of GDP in 2011 and 9.0% of GDP in 2012.

Monthly review

• In late March a former minister of the interior, Almerino Manhenje, was sentenced to two years in prison after being convicted of financial impropriety committed during his period in office (1996-2005).
• In a separate case, the chairman of the constitutional council, Luis Mondlane, who is in effect the country's most senior judge, resigned on March 17th after local media reports alleged that he had misused council funds.
• A recent report has revealed large discrepancies in accounts of mining taxes and royalties paid by firms and recorded by the government. However, critics of the report claim that this was owing to different accounting methodologies.
• In mid-March the World Bank approved a loan to the Mozambican government of US$70m towards a project to develop agriculture known by the acronym PROIRRI.
• In late March a UK-Australian firm, Rio Tinto, announced that it would lift conditions on its bid for Riversdale of Australia, which holds coal production licences for around 250,000 ha in the Tete-Moatize area of Mozambique.