By June the World Bank plans to provide $300 million to support the national budget of the Republic of Mozambique, according to the World Bank country director for Mozambique, Idah Pswarayi-Riddihough.
After a meeting with the Mozambican Minister of Economy and Finance, Max Tonela, the World Bank country director said that priority sectors would included health, education, energy and agriculture. The funding proposal will be presented to the World Bank board by June.
“We are talking about a first installment of 300 million dollars, which we hope to take to our administration for approval by 30 June this year. Then we can consider other windows of financing for 2023 and 2024”, said Pswarayi-Riddihough.
International organizations and financial institutions have returned after the Government of Mozambique started to undertake necessary reforms. In April, the International Monetary Fund (IMF) also returned with a set of new funded programmes to Mozambique, six years after the lender halted its previous deals in the wake of a financial scandal involving three fraudulent security-linked companies, and two banks – Credit Suisse and VTB of Russia, on the basis of illicit loan guarantees issued by the government under former President Armando Guebuza.
Popularly referred to as “Hidden Debts” scandal involving $2.7 billion (€2.3 million), the financial scandal happened in 2013, and the case has since left an image of a corrupt country and brought high-level government official to testify as witnesses in the controversial judicial trial. It prompted 14 foreign donors, including IMF, to cut off aid and simultaneously sparked a currency collapse and debt crisis.
The IMF said in a report that its funds would be used to support sustainable, inclusive economic growth and long-term macroeconomic stability, in the world’s third poorest country measured by gross domestic production per capita. The programmes will address transparency in debt management and the natural resource sector.
Unlike many of Mozambique’s other partners, the World Bank did not cut off financial assistance entirely after the scandal of Mozambique’s “Hidden Debts” became public knowledge in April 2016. World Bank aid continued, but in relatively small amounts, project by project.
Now the Bank seems prepared to return to the modality of direct budget support. Pswarayi-Riddihough said that the improvement in good governance supposedly recorded in recent years contributed to the resumption of World Bank support. She claimed that this was an important step for regaining the trust of the country’s partners.
Major work had been undertaken around questions of transparency and good governance, she alleged – but admitted that Mozambican civil society is continuing to demand greater advances in these areas. Mozambique’s new programme with the International Monetary Fund (IMF), she added, could give a strong signal to the market. Indeed, it will send a strong signal to all of Mozambique’s partners.
The agreement between Mozambique and the IMF, approved by the IMF Executive Board, will make $456 million available to the country. An amount of $91 million will become available immediately. At the time, Tonela said the agreement with the IMF marked the start of a new phase, leading to the resumption of sustainable growth of the Mozambican economy.
With an approximate population of 30 million, Mozambique is endowed with rich and extensive natural resources but remains one of the poorest and most underdeveloped countries in the world. It is a member of the Southern Africa Development Community (SADC).