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Mozambique on Cusp of New IMF Program After Six-Year Hiatus

Residents in Meconta, district of Nampula in Mozambique walk in floodwater after Cyclone Gombe, , Mozambique, 12 March 2022. (Photo: EPA-EFE/ANDRE CATUEIRA)

Mozambique is on the cusp of a new funded program with the International Monetary Fund, six years after the lender halted its previous deal in the wake of a debt scandal.

The nation reached a staff-level agreement with the IMF for a three-year extended credit facility program that will see the southern African country access roughly $470 million in loans, the Washington-based lender said in a statement Monday. The IMF’s board may approve the program by June, which hinges on Mozambique passing a law to govern a planned sovereign wealth fund that will oversee billions of dollars of revenues forecast from natural gas projects due to start this year, it said.

The program will address transparency in debt management and the natural resource sector, the IMF said.

The deal is a landmark for the IMF and Mozambique after relations soured in 2016, when the government owned up to about $1.2 billion of government-guaranteed loans that it had failed to disclose to the fund under the terms of their then agreement. In the aftermath of what became known as the hidden debt scandal, the nation has struggled to rebound economically.

An Islamic State-linked insurgency in the north of the southeast African nation has also weighed on its economic revival and prompted TotalEnergies SE last year to halt its $20 billion project to extract and export natural gas, which would have been the biggest private investment yet in Africa.

The funds will be used to support sustainable, inclusive economic growth and long-term macroeconomic stability, in the world’s third poorest country measured by gross domestic production per capita, IMF said.

“In recent years the Mozambican economy has been hit by a series of severe shocks that risk intensifying vulnerabilities and worsening socioeconomic conditions,” said Alvaro Piris, who led a visit from IMF that ended March 22. “Devastating terrorist attacks in the north of the country have displaced more than 800,000 people and delayed the development of liquefied natural gas projects.”

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