put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began 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 volcanic activity 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
Moroccan economic policies brought macroeconomic stability
to the country in the early 1990s but have not spurred growth
sufficient to reduce unemployment that nears 20% in urban areas.
Poverty has increased due to the volatile nature of GDP, Morocco's
continued dependence on foreign energy, and its inability to promote
the growth of small and medium size enterprises. However, GDP growth
rebounded to 6.7% in 2006 due to high rainfall, which resulted in a
strong second harvest. 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 and
Morocco's financial sector is rudimentary. Moroccan authorities
understand that reducing poverty and providing jobs is key to
domestic security and development. In 2004, Moroccan authorities
instituted measures to boost foreign direct investment and trade by
signing a free trade agreement with the US, which entered into force
in January 2006, and sold government shares in the state
telecommunications company and in the largest state-owned bank.
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, which
the government hopes to achieve by increasing tourist arrivals and
boosting competitiveness in textiles.

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
s