International Monetary Fund grants Mozambique US$2.4 million loan

21 June 2006

Washington, USA, 21 June – The International Monetary Fund (IMF) Monday granted Mozambique a loan of US$2.4 million, after approval and conclusion of the new phase of the country’s economic support program.

In a statement published in Washington, the IMF Board of Directors praised the Mozambican authorities’ handling of the issue of the Cahora Bassa hydroelectric dam, at a time when it remains to be known how Mozambique will finance the transferral of control of the company from the Portuguese state to the Mozambican state.

According to the IMF “the authorities’ commitment to financing the transfer of majority ownership of the Cahora Bassa dam (HCB) operating company through non-recourse financing that does not increase the government’s liabilities to commercial creditors is welcome.”

“Mozambique’s external debt levels will remain well below its indicative thresholds for debt distress in the foreseeable future,” the IMF said.

The payment of the HCB debt to Portugal, totalling around US$1 billion, is in exchange for control of the largest dam in Southern Africa to Mozambique, which will have an 85 percent share in the infrastructure.

The Fund also praised the authorities’ efforts “to create sufficient fiscal space for priority investments,” and that this, “will require enhanced revenue mobilization,” and a, “reinvigorated public sector reform program and governance strategy aimed at improving public service delivery and using additional donor assistance effectively.”

With this extension the total loan granted by the IMF to Mozambique increased to US$11.9 million under the terms of the country’s Growth and Poverty Reduction Strategy Paper (GPRSP).

“Mozambique’s strong macroeconomic performance continued in 2005 and early 2006, despite exogenous shocks. Fiscal results have been commendable and all performance criteria through end-March 2006 have been met. While the macroeconomic outlook remains favorable, vigilance will be required, in light of volatile oil prices and unpredictable weather,” the IMF report said. (macauhub)