IMF extends credit to Mozambique after debt scandal

This file photo taken on January 26, 2022, shows the International Monetary Fund headquarters in Washington, DC. The IMF executive board on Friday approved a $44 billion loan for Argentina to help the inflation-wracked country's economy, with $9.7 billion of the funding available immediately. OLIVIER DOULIERY / AFP

Following months of talks, the IMF reached a three-year Extended Credit Facility deal with Mozambican authorities, to the tune of $470 million, it said in a statement.

The agreement, still subject to IMF management and executive board approval, will "support the government’s reforms addressing long-term structural challenges in the management of public resources and governance", it said in a statement.

It will also fund "sustainable, inclusive growth, and long-term macroeconomic stability".

Mozambique is yet to recover from a huge debt that triggered an economic crisis, the worst the country has experienced since independence from Portugal four decades ago.

The government contracted secret loans amounting to $2 billion (1.8 billion euros) in 2013 and 2014 from international banks to buy a tuna-fishing fleet and surveillance vessels.

Maputo masked the loans from parliament but the debt came to light in 2016, prompting donors, including the IMF, to turn off the financial support tap.

An independent audit later found $500 million had been diverted and remains unaccounted for.

In 2020, the IMF approved a $309-million emergency financial support to help Mozambique meet its fiscal needs and for urgent balance of payment issues in the face of the Covid pandemic.

In light of the history of state corruption, observers are concerned that the funds may not all be used for intended purposes.

"Given the time of election that is starting,... though it's said the money is to improve good governance, the reality is there is going to be a big feast," said Adriano Nuvunga, chairman of Mozambique's Budget Monitoring Forum, suggesting the money risks being diverted.

"The funds will not reach people. We don't see an appetite for reforms from government," Nuvunga told AFP.