Mozambique: IMF announces deal for $470M funding until 2025 – Lusa

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Mozambique: IMF announces deal for $470M funding until 2025 – Lusa

3:47 CAT | 29 Mar 2022

File photo: Lusa

The International Monetary Fund (IMF) announced on Monday that it has reached an agreement with Mozambique for the implementation of an Extended Fund Programme (EFP) until 2025, disbursing financial assistance for the first time since the hidden debt scandal.

“The IMF team has reached a technical agreement with the authorities of Mozambique for a three-year programme supported by an EFP amounting to US$470 million [€428 million],” IMF country team leader Alvaro Piris announced.

“The government’s economic programme supported by the EFP aims to enhance sustainability, inclusive growth and long-term macroeconomic stability,” he added, noting that the programme is still subject to approval by the Fund’s board of directors, which usually happens a few weeks after the announcement of the technical agreement.

This is the first time the IMF has funded Mozambique since the disclosure of the so-called hidden debt scandal in 2016, with only occasional financial aid following specific disasters, such as the Covid-19 pandemic or cyclones Kenneth and Idai, in 2019.

“In recent years Mozambique has been affected by a series of severe shocks that risk intensifying vulnerabilities and worsening socioeconomic conditions,” the IMF said, pointing to the examples of the attacks in the north, which have displaced over 800,000 people and delayed the development of liquefied natural gas projects.

The programme now announced aims to “focus on growth, fiscal sustainability and reforms in governance and public finance management, balancing financing with moderate adjustment that will rebuild fiscal space and reduce debt and financial vulnerabilities,” the IMF added.

Among the reforms agreed at meetings already held by Adriano Maleiane as prime minister, the IMF noted, “a series of fiscal and VAT policy reforms,” and noted that “an important step will be the approval of a sovereign wealth fund,” as well as the creation of a strong institutional framework for managing the wealth of natural resources, initially focused on liquefied natural gas.

In the area of governance, the IMF stressed the need for the Covid-19 audit report to be published and points out that “the programme also deals with transparency in debt management and the natural resources sector, key areas identified in the 2019 Diagnostic Report on Transparency, Governance and Corruption prepared by the government with IMF support.”

The IMF was one of several international partners that suspended financial aid following the disclosure of loans from public companies that had not been announced either to parliament or to international donors, a process known as the hidden debts scandal which involved several members of the executive then led by Armando Guebuza and in which the current President was minister of defence, the area in which the public companies that contracted the hidden loans operated.

Source: Lusa