IMF, Mozambique to discuss first credit facility since $2-B graft scandal

The International Monetary Fund will start discussions next month on an extended credit facility with Mozambique, the fund said on Tuesday, its first potential program with the country since suspending support in 2016. 

That year Mozambique unveiled hefty state-backed borrowing it had previously failed to disclose, in a $2-B corruption scandal that prompted donors to cut off aid and sparked a currency collapse and debt crisis. 

Since then the IMF has delivered some targeted aid to help Mozambique recover from natural disasters and cyclones, but the extended credit facility would be its first formal program. 

"Staff stand ready to commence negotiations in late January 2022, in accordance with the authorities’ preferred timeline," the IMF said in a statement after a staff visit to the country. 

The program would aim to help ease financing pressures as Mozambique recovers from the pandemic, support poverty reduction and equitable growth, as well as catalyze additional development financing, the Fund said. 

One of the world's most impoverished countries, Mozambique is still grappling with its hefty debt burden, as well as an Islamist insurgency and the impact of COVID-19, which led to its first economic contraction in three decades last year. 

The discovery of massive LNG reserves saw Mozambique emerge as a potential major global exporter of the fuel, but graft scandals and the insurgency have dented or threatened the promised benefits. 

The IMF said growth would reach 2.2% this year and 4% in the long-term, with the realization of LNG reserves delivering an even sharper increase. 

Risks to the outlook include vulnerability to climate change and a deterioration in the security situation, which could delay or stop LNG projects, it added.

Fiscal pressures are acute, it said, with economic difficulties of state-owned enterprises and the debts linked to the corruption scandal presenting risks.

Mozambique is disputing in the courts the validity of some of the debt, including a loan of $622 MM from investment bank Credit Suisse. 

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