April 25, 2020 / 4:52 AM / a month ago

IMF approves $309 million in emergency financing to Mozambique to address coronavirus hit

JOHANNESBURG (Reuters) - The International Monetary Fund (IMF) said on Friday it has approved a disbursement of $309 million to help Mozambique meet urgent balance of payment and fiscal needs stemming from the coronavirus pandemic.

African nations including Mozambique have become heavily indebted in the past decade and are seeking support from the IMF, World Bank and European Union for wide-ranging debt relief.

Last Thursday Mozambique lowered its forecast for economic growth this year to 2.2% from a previous forecast of 4% because of the impact of the virus, which has infected 65 people.

Its budget showed the southern African country, which was struck by two devastating cyclones last year, expects to record a deficit of more than 10% of gross domestic product in 2020.

“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,” IMF Deputy Managing Director and Chair Tao Zhang said in a statement.

“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.”

The IMF’s emergency financial support is under the Rapid Credit Facility.

The Fund said 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 macro-economic 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, it added.

Reporting by Nqobile Dludla; Editing by Sandra Maler and Daniel Wallis

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