In his annual State of the Nation speech, the Mozambican leader said that increasing foreign investment in the country's small but booming economy was key to raising productivity and living standards for its 18 million people.

"We will be going outside to find more international partners," Guebuza told the southern African country's parliament in Maputo. He added that the government would try to persuade foreign firms to boost investment in Mozambique's energy and agriculture sectors.

Guebuza, a Western-leaning technocrat who has relaxed investment rules and implemented other economic reforms since taking power in 2005, said he was pleased with the pace of the economy and predicted it would continue to grow in 2008.

He predicted that Mozambique would meet its targeted 7 percent GDP growth for 2007 and continue growing by about that amount next year, repeating the bullish forecast he made in an interview with Reuters last week.

Inflation will be contained at 5.3 percent this year and remain within single digits next year, Guebuza said.

Mozambique, one of Africa's poorest countries and still largely dependent on agriculture, has become popular with foreign companies and investors interested in staking a claim to Africa's vast mineral and energy resources.

A number of Western oil firms are drilling offshore in Mozambique's Rovuma Basin, which is believed to contain healthy supplies of gas and possibly oil.

Mozambique also is hoping that foreign investors will show more interest in a planned upgrade of the Cahora Bassa hydroelectricity development in northern Tete province, which was neglected during the country's 17-year civil war.

Cahora Bassa has the potential to produce 14,000 MW of hydro power, but it currently only has output of 2,075 MW. Most of the supply is sold to South Africa and Zimbabwe under contracts agreed to before Mozambique's 1975 independence from Portugal.

"We will continue exporting power to South Africa and Zimbabwe and very soon to Malawi," Guebuza said.

But the 64-year-old Mozambican leader acknowledged that the country faced serious challenges, highlighted by a severe HIV/AIDS crisis.

An estimated 16 percent of Mozambicans, mostly economically active adults between 14 and 49 are infected with HIV, and only a small number have access to life-saving drugs. About 500 new HIV infections are recorded each day.