## News Brief: Mozambique to Receive US$3.7 Billion in Debt Relief Through the HIPC Initiative

_IMF News, June 30, 1999_

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**Canonical URL:** [News Brief: Mozambique to Receive US$3.7 Billion in Debt Relief Through the HIPC Initiative](https://www.imf.org/en/news/articles/2015/09/29/18/03/nb9935)

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## Bibliographic details
- Published: June 30, 1999

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### HIPC debt relief package and valuation
- The IMF and the World Bank’s International Development Association (IDA) have agreed that Mozambique has met the requirements for receiving close to US$3.7 billion in debt relief from its external creditors under the Heavily Indebted Poor Countries (HIPC) Initiative.
- The total debt relief package is worth US$1.7 billion in today’s values.
- The IMF and IDA increased assistance beyond the US$2.9 billion (US$ 1.4 billion in today’s values) originally committed in April 1998 to ensure Mozambique reached the agreed debt sustainability target.
- This operation is the largest debt relief organized under the HIPC Initiative so far and raises the total relief granted under the HIPC Initiative to US$5.5 billion (US$2.7 billion in today’s values).
- Mozambique is the fourth country to reach the completion point under the HIPC Initiative, along with Uganda, Bolivia, and Guyana.

### Reduction in external public debt and debt-service obligations
- HIPC Initiative debt relief will reduce Mozambique’s external public debt by almost two thirds, from about US$2.7 billion to US$1 billion in today’s values (on top of debt relief provided under traditional mechanisms).
- External debt-service obligations:
  - Will fall to an annual average of US$73 million in 1999-2005.
  - Compared with an average of US$169 million that would have been due in the absence of HIPC Initiative relief.
  - Compared with the US$104 million actually paid in 1998.
- By 2001, debt service due would fall to 8 percent of exports and 10 percent of government revenues.
  - Compared with 19 percent of exports and 23 percent of revenues actually paid in 1998.

### Fiscal space and planned social spending increases
- Mozambique remains one of the world’s poorest countries, with about 70 percent of its population living in poverty.
- Taking into account the relief, the Government plans to increase annual current spending on health and education:
  - From about US$120 million in 1998
  - To US$175 million by 2001
  - Characterized as moving from just over the amounts paid in debt service in 1998 to more than double the projected debt-service payments after HIPC Initiative assistance.

### Contributions by IDA and the IMF under HIPC
- IDA will provide debt service relief to Mozambique equivalent to US$975 million, or US$381 million in today’s values.
  - This debt reduction will be delivered mainly through the purchase and cancellation by the HIPC Trust Fund of IDA credits, resulting in debt service savings of US$327 million in today’s values.
  - In addition, an IDA grant has been made to support improved economic management, which will provide debt service savings of US$54 million in today’s values.
- IMF assistance under the HIPC Initiative:
  - Will take the form of a grant deposited into an escrow account to be used to cover part of the debt service falling due to the IMF.
  - This assistance, to be delivered over the life of outstanding obligations to the IMF, will amount to about US$125 million in today’s values.

### Economic and social reforms and outcomes supporting HIPC completion
- Mozambique has pursued a wide-ranging program of economic stabilization and structural reform, including:
  - Market liberalization
  - Completion of an ambitious privatization program
  - Fiscal reform
  - Progress on public sector reform
- Economic performance and service delivery improvements:
  - Strong economic growth averaging more than 8 percent per year over the past five years.
  - Primary school enrollment rate increased from 62 percent to 71 percent between 1996 and 1998.
  - Coverage for key vaccinations increased from 58 percent to 77 percent between 1996 and 1998.
  - Between 1992 and 1998, the number of primary classrooms, including those in rural areas, increased by more than 60 percent.
  - Notable progress in expanding delivery of health, education, and water services, as well as in expanding the road network.

### Future considerations and potential additional assistance
- Mozambique is expected to benefit from changes proposed by the recent G-7 Cologne Summit to strengthen the HIPC Initiative.
- Once agreement is reached on an enhanced HIPC Initiative, additional HIPC Initiative assistance will be considered for Mozambique.

*International Monetary Fund — News Brief, June 30, 1999*

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## References

- [Republic of Mozambique and the IMF](http://www.imf.org/external/country/MOZ/index.htm)
- [News Briefs](https://www.imf.org/en/news/searchnews)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/29/18/03/nb9935_