The World Bank is considering providing US$300 million (284 million euros) in direct support for Mozambique’s state budget, six years after the model was suspended by international partners, the Bank’s representative in the country said.
“We are talking about a first tranche of US$300 million, which we hope will be approved by our board by 30 June at the latest,” Idah Pswarayi-Riddihough said after a meeting with the minister for the economy and finance, Max Tonela, in Maputo.
This is the first direct World Bank aid to the Mozambican state budget since the disclosure of the so-called hidden debts scandal in 2016, which led international partners to suspend direct financial aid following the disclosure of loans from public companies that had not been announced either to parliament or to international donors.
While she believes that support will be authorised, the World Bank representative stressed the importance of completing the reforms that the Mozambican government has been undertaking to regain the confidence of international partners.
“The reforms are almost complete and literally I think the remaining reforms will be completed by the end of this month,” said Idah Pswarayi-Riddihough, who sees Tuesday’s approval of a new financing agreement of around €445 million with the International Monetary Fund (IMF), which also suspended direct budget support in 2016, as an important step towards recovering Mozambique’s credibility in the international market.
“The approval of a new programme with the IMF gives a strong signal to the market, but mainly to all of Mozambique’s partners,” Idah Pswarayi-Riddihough said.
As well as the US$300 million that is expected to be approved in June, the World Bank representative said that the parties would discuss two more direct funding for the state budget over the next two years, for an as yet unknown amount and which will be defined according to the government’s reforms, particularly transparency in accounts and governance.
“There are several reforms that are under discussion, but I think that transparency and governance are among the most important. These are points that civil society has always raised,” said Idah Pswarayi-Riddihough.
For the World Bank representative, the economic and social development of Cabo Delgado, a province terrorised by an armed insurgency since 2017, must remain among the priorities and the reconstruction plan designed by the government will deliver results.
“I can say with some confidence that the plan the government has drawn up is going to be important for development partners, ensuring a coordinated way of working and hopefully good results,” she said.
The World Bank and the IMF are among the various international partners that have suspended direct financial aid to the state budget, with the two focusing on one-off financial aid following specific disasters and emergency situations, such as the Covid-19 pandemic, cyclones Kenneth and Idai in 2019, or the humanitarian crisis caused by armed violence in Cabo Delgado.
The international partners suspended aid following the hidden debt scandal, which involved several leaders of the executive then led by Armando Guebuza and in which the current president, Filipe Nyusi, was defence minister, the area in which the public companies that contracted the hidden loans operated.