IMF approves credit facility assistance to Mozambique following Cyclone Idai

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BO'AO, CHINA - MARCH 26: Zhang Tao, Deputy Managing Director at the IMF, attends 'Global Economic Outlook 2019: Certainties & Uncertainties' session on day one of the Boao Forum for Asia Annual Conference 2019 at the BFA International Convention Center on March 26, 2019 in Bo'ao, Hainan Province of China. The Boao Forum for Asia (BFA) Annual Conference 2019 with the theme of 'Shared Future, Concerted Action, Common Development' is held in Bo'ao on March 26-29. (Photo by VCG/VCG via Getty Images)
BO’AO, CHINA – MARCH 26: Zhang Tao, Deputy Managing Director at the IMF, attends ‘Global Economic Outlook 2019. (Photo by VCG/VCG via Getty Images)

The International Monetary Fund (IMF) on Friday approved emergency financial assistance to Mozambique enabling the disbursement of US$118.2 million.

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 assistance was approved under the Rapid Credit facility (RCF), which provides immediate financial assistance with limited conditionality to low-income countries with an urgent balance of payments need.

“Emergency assistance and reconstruction costs are estimated to be enormous, making this storm the worst and costliest natural disaster to ever strike the country,” the IMF Deputy Managing Director Tao Zhang said.

Zhang said authorities are reallocating lower priority spending to emergency assistance, but the bulk of emergency assistance and reconstruction needs will have to be covered by the international community. This will mostly be in the form of grants to ensure debt sustainability.

Zhang says disbursement under the IMF’s RCF will help address Mozambique’s immediate financing needs and play a catalytic role in securing grants from donors and the international community.

However, the IMF warned authorities to remain vigilant about possible second-round effects on inflation of supply shock caused by the cyclone.

At least 600 people have been killed and tens of thousands others displaced by Cyclone Idai which affected Mozambique, Zimbabwe and Malawi.

The World Bank estimates that Cyclone Idai caused at least $2 billion in damages and affected three million people.

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