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MAPUTO, 14 Jun 2005 (IRIN) - Civil society groups in Mozambique say the savings resulting from debt relief should be channelled into developing the country's agricultural sector.
Mozambique is among the 18 countries eligible for a total writeoff of foreign debt after an agreement was reached by the Group of Eight (G8) industrialised countries in London at the weekend.
"We were surprised by the G8 decision, but we see it as a step forward in a long process," Silvestre Baessa of the Mozambique Debt Group told IRIN on Tuesday.
In the capital, Maputo, Prime Minister Luisa Diogo told Reuters more effort was needed to increase aid and reduce trade imbalances, but the cancellation had left the country with "a very small amount of debt" to other lenders.
Mozambique is expected to save around US $55 million a year as a direct result of the G8 decision.
Since the end of a 16-year civil war in 1992, the country has been roundly praised for achieving the fastest economic growth rate in Africa - around eight percent annually - between 1994 and 2002, while inflation dropped from about 70 percent in 1994 to around 10 percent currently.
Increased spending on poverty reduction measures has also brought improved social indicators, but civic bodies pointed out that that debt cancellation was not a panacea for a myriad social and economic problems.
"Debt relief needs to be combined with more overseas development aid, better terms of trade and good governance in Mozambique," Baessa commented.
He hoped leaders of the industrialised countries at next month's G8 summit in Gleneagles, Scotland, would decide to increase development aid to Mozambique.
There were also concerns that civil society would have very little say over how donor funds are to be spent, and that ongoing corruption could threaten economic progress. Donors have criticised the government in the past for not taking a tougher stance on corruption.
Baessa said he was optimistic that the new government of Armando Guebuza would make a difference, but added that it was too soon to judge.
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