The Executive Board of the International Monetary Fund (IMF) today approved
emergency financial assistance to the Republic of Mozambique under the
Rapid Credit facility (RCF)
[1]. The Board’s decision enables the disbursement of SDR85.2 million (about
US$118.2 million, or 37.5 percent of quota).
The financial assistance is intended to address large budgetary and
external financing gaps arising from reconstruction needs after Cyclone
Idai, which caused significant loss of life and infrastructure damage. The
authorities remain committed to macroeconomic stability, which will also be
underpinned by the IMF’s financing. Key fiscal measures include
reallocating lower priority spending to emergency assistance to the poorest
and for reconstruction.
Following the Executive Board’s discussion of Mozambique, Mr. Tao Zhang,
Deputy Managing Director and Acting Chair, issued the following statement:
“Mozambique suffered significant loss of life and substantial damage to
physical infrastructure and productive capacity as result of the recent
Tropical Cyclone Idai. Emergency assistance and reconstruction costs are
estimated to be enormous, making this storm the worst and costliest natural
disaster to ever strike the country. Disbursement under the IMF’s Rapid
Credit Facility will help address the country’s immediate financing needs
and play a catalytic role in securing grants from donors and the
international community.
“The authorities are reallocating lower priority spending to emergency
assistance, but their room for maneuver is limited and the bulk of
emergency assistance and reconstruction needs will have to be covered by
the international community mostly in the form of grants to ensure debt
sustainability.
“The authorities are committed to creating fiscal buffers, including
preparing for, and dealing with, future natural disasters. They are seeking
significant debt relief from private creditors which is important to put
public debt on a declining path.
“While the authorities cautiously proceed with normalization of monetary
policy, they should remain vigilant about possible second-round effects on
inflation of supply shock caused by the cyclone.
“The authorities are committed to improving transparency, governance, and
accountability. Ongoing preparation, with Fund technical assistance, of a
diagnostic report on governance and corruption challenges in the areas most
relevant for economic activity will help to further ensure that scarce
public resources are put to good use. Publication of the diagnostic report shortly after
finalization will be important in this regard.
“Going forward, it will be critical to increase the economy’s resilience and
preparedness to natural disasters and climate change.”
[1]
The
RCF
provides immediate financial assistance with limited conditionality
to low-income countries with an urgent balance of payments need. Financing under
the RCF currently carries a zero-interest rate, has a grace period
of 5.5 years, and a final maturity of 10 years. The Fund reviews
the level of interest rates for all concessional facilities every
two years.
