Good afternoon. It was perhaps inevitable that something was going to happen to the Mozambican government’s loan programme with the International Monetary Fund (IMF; see below). The government was only partially fulfilling the conditions of the loan last year, when anti-government protests blew up and punched an estimated $664m hole in state revenues. Since then, ministers have suspended VAT on sugar, cooking oil and soap to address people’s complaints about the cost of living, in defiance of the IMF’s wishes. With public finances on life support, it would have been very difficult for the government and the IMF to argue that the conditions to carry on paying out the loan still existed. Overspending on the wage bill compared to the IMF-imposed limits has been a recurring problem, and one that showed no signs of going away this year.
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Tom Gould
Nevertheless, the IMF’s decision (which it says was reached with government agreement) to bring an early end to the so-called extended credit facility, rather than pay out a reduced amount, goes against the fund’s normal practice. What this means is that the loan instalments due at the end of last year and in March this year, totalling approximately $120m out of the total loan of $456m, will not now be made. IMF loans made under this type of facility are usually interest-free. The government will not find such generous terms elsewhere.
