IMF Executive Board Approves US$309 Million in Emergency Assistance to Mozambique to Address the COVID-19 Pandemic

The IMF approved a disbursement under the Rapid Credit Facility (RCF) of US$309 million to help Mozambique meet urgent balance of payment and fiscal needs stemming from the COVID-19 pandemic.
The pandemic is expected to have a significant impact on Mozambique’s economy, interrupting a nascent recovery following two powerful tropical cyclones that struck in 2019.
To mitigate the impact of the pandemic and preserve macroeconomic stability, the government has taken several steps to increase health spending, strengthen social protection to the most vulnerable, and support micro, small, and medium-sized businesses.
The Executive Board of the International Monetary Fund (IMF) today approved a disbursement under the Rapid Credit Facility (RCF) of SDR 227.2 million (about US$ 309 million at today’s exchange rate) to help Mozambique meet urgent balance of payment and fiscal needs stemming from the COVID-19 pandemic. The pandemic is expected to have a significant impact on Mozambique’s economy, interrupting a nascent recovery following two powerful tropical cyclones that struck in 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. To mitigate the impact of the pandemic and preserve macroeconomic stability, the government has taken several steps to increase health spending, strengthen social protection to the most vulnerable and support micro-businesses and small and medium-sized enterprises. The Bank of Mozambique has reduced the policy rate and provided additional liquidity in both local and foreign currencies to the financial market. The weakened macroeconomic outlook and deteriorating fiscal situation have created urgent external and fiscal financing needs. The IMF financial support will make a substantial contribution toward fulfilling the needed increases in health spending and other social safety nets.

Following the Executive Board discussion, Mr. Tao Zhang, IMF Deputy Managing Director and Chair, made the following statement:

“Mozambique is expected to be significantly affected by the COVID-19 pandemic, dashing prospects of a nascent economic recovery following two powerful tropical cyclones that struck in 2019. The IMF’s emergency financial support under the Rapid Credit Facility, along with the additional donor grant financing it will help to catalyze, 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. 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. Participation in the G20 debt standstill initiative will provide additional resources to fight the pandemic while limiting a deterioration of Mozambique’s debt liquidity indicators in the near term.

“The authorities are committed to prevent corruption and misuse of emergency financing, by strengthening transparency and accountability. In this connection, they will publish large public procurement contracts and conduct and publish ex-post audits of funds’ use.

“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. It will also be important to implement structural reforms to support inclusive and sustainable growth.’’