APA-Maputo (Mozambique) The International Monetary Fund (IMF) has approved US$60 million budgetary support for Mozambique under a three-year programme aimed at assisting the southern African country to bolster its economy and reduce public debt.
The Bretton Woods institution said in a statement that its executive board approved the latest disbursement following the conclusion of the third review of Mozambique’s three-year Extended Credit Facility (ECF) arrangement.
“The Executive Board’s decision allows for an immediate disbursement of SDR 45.44 million (about US$60.7 million), usable for budget support, bringing Mozambique’s total disbursements under the ECF arrangement to SDR 204.48 million (about US$273 million),” the Fund said.
The SDR (Special Drawing Right) is an international reserve asset. The SDR is not a currency, but its value is based on a basket of five currencies – the US dollar, the euro, the Chinese renminbi, the Japanese yen and the British pound sterling.
The three-year ECF arrangement aims to support Mozambique’s economic recovery and reduce public debt and financing vulnerabilities, while fostering higher and more inclusive growth through structural reforms.
IMF deputy managing director Bo Li applauded Mozambique’s ECF performance, saying progress so far has generally been satisfactory.
“The economic recovery is accelerating, supported by the liquified natural gas (LNG) projects amid modest non-mining growth,” Bo said.
He added: “At the same time, inflation pressures have declined sharply.”
Mozambique is one of Southern African Development Community member states that have witnessed significant findings of natural gas reserves in recent years. Others are Namibia, Tanzania and Zimbabwe.
Bo, however, noted that although the country’s economic outlook “remains positive, significant risks remain, mainly due to adverse climate events and the fragile security situation.”
“Given Mozambique’s high debt and tight financing conditions, continued fiscal consolidation efforts are warranted.”
He called for the broadening of Mozambique’s value added tax base to mobilize revenues in an efficient way, as well as continued wage bill reforms to create fiscal space for high-priority spending, including social spending.
This is the fourth such disbursement by the IMF since September 2022 when it first approved an ECF arrangement for Mozambique following years of suspended assistance to the country in the aftermath of the controversial “hidden loans” scandal.
Several Mozambican officials are accused of fraudulently getting loans valued at more than US$2.2 billion from international financial institutions for private companies between 2012 and 2016 but using the government as a guarantor.
This led to the suspension of financial support to the country by the IMF and other multilateral financial institutions.
JN/APA