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“Mozambique’s Priority is to Support Resumption and Control Debt” – IMF

“Mozambique’s Priority is to Support Resumption and Control Debt” – IMF

The International Monetary Fund (IMF) said on Tuesday, May 10, that Mozambique’s priorities following new financing are to support recovery and reduce public debt, which remains above 100 percent of gross domestic product (GDP).

“Mozambique has managed the covid-19 pandemic relatively well, maintaining macroeconomic stability and reform momentum despite a series of shocks affecting the country, culminating in the effects of the war in Ukraine; given the limited space for policy formulation, the priorities are to support the ongoing economic recovery and address debt vulnerabilities,” IMF Deputy Managing Director Bo Li commented in a statement issued today in Washington.

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The document, the day after the announcement of the approval of a $470 million loan under an Extended Credit Line, notes that “the authorities are implementing a broad reform agenda, which includes strengthening the management and debts of public enterprises, improving fiscal risk management and debt transparency, and strengthening public financial management and the anti-corruption framework.”

The Fund expects Mozambique to accelerate economic growth and predicts the rate will rise to close to 4% in the next few years, excluding extractive industries, and also says that “major liquefied natural gas projects are expected to enter production near the end of the year.”

On Monday, May 9, a financing agreement was announced, classified as “the beginning of a new phase towards the resumption of sustainable growth of our economy” by Mozambique’s Minister of Economy and Finance, Max Tonela, during a press conference.

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

The IMF representative in Mozambique, Alexis Mayer-Cirkel, stated that the objective is to support a set of government reforms aimed at ensuring economic recovery, highlighting the importance of the public finance management sectors.

“This financial assistance program helps in the recovery in the sense of facilitating and creating space for the budget to be able to sustain in the face of fiscal pressures, derived from the various shocks that we are all experiencing in the world,” Alexis Mayer-Cirkel said, adding that the grace period of the debt is 10 years and the repayment is long term.

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During the negotiations, the IMF advocated a series of tax and VAT policy reforms, as well as the creation of a sovereign fund for revenues from mineral resources.

The agreement in principle between the IMF and Mozambique was announced on March 28, and this afternoon was approved by the board of directors.

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 scandal of hidden debts and involving several members of the executive then led by Armando Guebuza and in which the current President was Minister of Defense, the area in which the public companies that contracted the hidden loans operated.

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