An IMF study released last August says that, contrary to IMF assumptions, low income African countries, including Mozambique, are able to manage significant increases in aid. A big increase in aid to Mozambique did lead to an increase in inflation, but this was brought back to a reasonable level, the study found, both by Bank of Mozambique actions and because fiscal expansion brought rapid GDP growth. The study goes on to challenge one of the IMF's own most central articles of faith by saying that it seems that periods of higher inflation actually achieve real growth, and that this should be tolerated in order to keep the exchange rate from depreciating. Aid volatility is the problem, it says, and low income countries can make good use of "significant increases in aid" if they are planned. But it appears that the IMF team which negotiated the letter of intent with Mozambique last year had not read the institution's own study. The study is "The Macroeconomics of Managing Increased Aid Inflows: Experiences of Low-Income Countries and Policy Implications, August 8, 2005" and is on http://www.imf.org/external/np/pp/eng/2005/080805a.pdf