The Executive Board of the International Monetary Fund has announced a disbursement to Mozambique of about 309 million US dollars under the IMF’s Rapid Credit Facility (RCF), to allow the country to meet urgent balance of payments and fiscal needs arising from the COVID-19 pandemic.
A Friday IMF press release said the pandemic is expected to interrupt Mozambique’s “nascent recovery” from the two cyclones that hit the country in March and April 2019.
“Significant disruptions are emerging in services, transport, agriculture, manufacturing and communications coupled with a much worse external environment affecting export-oriented sectors, such as mining”, the release noted.“ The weakened macroeconomic outlook and deteriorating fiscal situation have created urgent external and fiscal financing needs.”
Financial support from the IMF, the release claimed “will make a substantial contribution toward fulfilling the needed increases in health spending and other social safety nets.”
The IMF Deputy Managing Director, Tao Zhang, said, after the Executive Board meeting, that emergency support from the IMF under the Rapid Credit Facility, along with additional donor funding that the IMF hopes to catalyse, “will contribute to addressing Mozambique’s urgent balance of payments needs generated by the pandemic.”
“The authorities’ immediate priority is to limit the impact of the pandemic and preserve macroeconomic and financial stability”, Zhan said. “Higher health spending and measures to protect the most vulnerable in the society and support micro-businesses and SMEs are being enacted.”
“Given Mozambique’s limited fiscal space and high public debt, additional external support, preferably in the form of grants and highly concessional loans, is also urgently required to meet the country’s elevated financing needs and ease the financial burden of the pandemic,” he added.
He made no mention of the scandal of Mozambique’s “hidden debts,” the illicit guarantees given by the previous government, under the then president, Armando Guebuza, for loans of over two billion dollars obtained from the banks Credit Suisse and VTB of Russia by three fraudulent, security-related companies. The “hidden debts” led the IMF to suspend its programme with Mozambique in April 2016, and no new programme has yet been signed.
Zhang declared that the Mozambican authorities “are committed to preventing corruption and misuse of emergency financing, by strengthening transparency and accountability.”
This will involve the publication of large public procurement contracts and of audits on how the funds have been used.
“Once the pandemic eases, it will be critical to resume fiscal consolidation and strengthened debt management and transparency to ensure that public debt remains sustainable,” said Zhang. “It will also be important to implement structural reforms to support inclusive and sustainable growth.”
Source: AIM via Club of Mozambique