The President of the Republic of Mozambique Armando Guebuza visited the European Investment Bank (EIB) today in Luxembourg for discussions on EIB operations in Mozambique. On the occasion of this visit, a EUR 31 million loan was signed for the improvement and expansion of the water supply services in Maputo. Mr. Guebuza, accompanied by senior members of his Government, was greeted by EIB's Vice-President Torsten Gersfelt.

Mr. Guebuza and Mr. Gersfelt examined possible areas for future co-operation in Mozambique, which is one of the main beneficiaries of EIB loans in the Africa, Caribbean and Pacific (ACP) region. Since the beginning of operations in 1986, under the Lomé III Agreement, the EIB has approved more than EUR 400 million for projects, in particular in the industry, energy, infrastructures and telecommunications sectors, and in support of small and medium sized enterprises in the country.

At the same time, an EIB long-term loan of EUR 31 million was signed with the Republic of Mozambique for on-lending to Fundo do Investimento e Património do Abastecimento de Água -FIPAG- (the country's implementing agency for water supply programmes in urban areas) for improving and expanding the water supply services within the Greater Maputo Metropolitan area, with a population of 1.7 million inhabitants of which 48% live in absolute poverty. The water supply system is operated on the basis of a lease contract by a private company with European and local ownership.

The project's innovative financial approach combines, for the first time in the ACP region, an EIB long term concessional loan with the largest grant to date from the ACP-EU Water Facility (EUR 25 million). Implemented in close cooperation with the European Commission, the Dutch and the French Development Finance Agencies, the project has a high development impact and constitutes a showcase of donor coordination and joint sector development.

The Maputo Water Supply project has three main objectives: (i) increase the production of clean water by about 2/3 of the current installed capacity; (ii) improve the system's performance by reducing unaccounted for water; (iii) expand water supply in the poor peri-urban areas with the support of small local private operators.

The EIB loan fully meets the objectives of the Cotonou Agreement, which recognizes the importance of supporting ACP's States efforts towards the improvement of the coverage, quality of and access to basic infrastructure and services, including water.

The project also contributes directly to the Investment Facility (IF) strategy of poverty alleviation and to the Millennium Development Goals (MDG's) by providing first-time access to potable water to more than half a million people, of which two thirds are low-income.

The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects that further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union.

Financing in Africa, the Caribbean and the Pacific (ACP) is carried out under the provisions of the Investment Facility, set up by the ACP-EU Partnership Agreement, signed in Cotonou in June 2000. Under the Cotonou agreement the total financial aid available amounts to EUR 15 billion for 2002-2006, of which EUR 11.3 billion is grant aid from the EU member states, EUR 2 billion is managed by the EIB under the Investment Facility and up to EUR 1.7 billion is in the form of loans from the EIB's own resources. The Investment Facility is a revolving facility (loan amortizations will be invested in new operations), aiming at supporting technically, environmentally, financially and economically sound projects in the private or the commercially run public sector.