Country Report Mozambique March 2011

Outlook for 2011-12: International relations

Relations between the government and donors are likely to remain fraught in 2011-12, despite the resumption of aid disbursements following a "donor strike" in early 2010. However, the amount of aid pledged for 2011 has stagnated in nominal terms (meaning a drop in real terms), bucking the trend of recent years and reflecting donors' concerns over governance. Given the need for fiscal retrenchment in the West and the fact that Frelimo is unlikely to loosen its dominance of the state and the economy, aid pledges in 2012 are also expected to stagnate rather than rise. Ties with South Africa, Mozambique's main trading partner, will remain strong, driven by foreign direct investment (FDI) inflows and long-standing commercial links. Strong commercial, political and personal ties will ensure continued close relations with Portugal, which will remain a key source of FDI and diplomatic support. Investment from China, Brazil and India, particularly in railways and mining, will help to strengthen ties with those countries.

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