The country is moving slowly away from dependence on imports as domestic agriculture and industry expands. In recent years, donor funds have covered shortages in domestic food supplies and much needed imports of oil and capital goods. Cahora Bassa hydroelectric exports to South Africa and Zimbabwe should increase 1998 exports by another 30 percent. Other major foreign investment projects involving the export of natural gas or products using natural gas as a reductant, minerals, agricultural products, and transportation services, coupled with steady increases in local production, could lead to a further reduction in the trade deficit. Local industrial production should continue to substitute for some imports, especially in food and beverages.
Donors are prepared to make up the shortfall.
The really big macro-economic news over the past three years has been the precipitous fall in inflation, from 70 percent in 1994 to 16.6 percent in 1996. The expected inflation rate for 1997 is around 5 percent. At times, the metical has appreciated against the embattled South African rand. The Ministry of Planning and Finance's continued pledge to hold the line on spending and the Central Bank's promise to control money supply and effectively supervise the country's new private banking sector should, if carried out, control inflation in the foreseeable future. The government has made important strides in the past few years to attract foreign investment.