n to return in 1998, but lack of housing
limited the number. The agriculture sector continued to be affected
by the lack of suitable land for farming and the destruction of
crops. Prospects for the economy depend largely on developments in
relation to the volcano and on public sector construction activity.
The UK has launched a three-year $122.8 million aid program to help
reconstruct the economy. Half of the island is expected to remain
uninhabitable for another decade.

Morocco
Morocco faces problems typical for developing countries:
restraining government spending, reducing constraints on private
activity and foreign trade, and achieving sustainable growth.
Despite structural adjustment programs supported by the IMF, the
World Bank, and the Paris Club, the dirham is only fully convertible
for current account transactions. In 2004 Moroccan authorities
instituted measures to boost foreign direct investment and trade by
signing a free trade agreement with the US and selling government
shares in the state telecommunications company and in the largest
state-owned bank. Favorable rainfall over the past two years has
boosted agricultural output and GDP growth passed 4% in 2004. In
2005 the budget deficit is expected to rise sharply - from 1.9% of
GDP in 2004 - because of substantial increases in wages and oil
subsidies. Long-term challenges include preparing the economy for
freer trade with the US and European Union, improving education and
job prospects for Morocco's youth, and raising living standards.

Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Inflation was reduced to single digits during the late 1990s
although it returned to double digits in 2000-03. Fiscal reforms,
including the introduction of a value-added tax and reform of the
customs service, have improved the government's revenue collection
abilities. In spite of these gains, Mozambique remains dependent
upon foreign assistance for much of its annual budget, and the
majority of