The IMF approved a $309 million emergency loan to help Mozambique meet its fiscal needs following the outbreak of the new coronavirus.

IMF COVID-19 Coronavirus

The International Monetary Fund approved a $309 million emergency loan to help Mozambique meet its fiscal needs following the outbreak of the new coronavirus that’s dashing the southern African nation’s prospects of recovering from the impact of two cyclones last year.

The funds come from the IMF’s rapid credit facility set up to help nations deal with the outbreak and Mozambique will use the money to meet urgent balance-of-payments needs, the Washington-based institution said in a statement Friday.

Mozambique, one of the world’s poorest nations, has 65 confirmed cases of the virus, with about three-quarters of infections stemming from Total SA’s $23 billion liquefied natural-gas project in the far north of the country, according to data from the Health Ministry. Earlier this month, the fund slashed the nation’s economic growth forecast for this year to 2.2% — which would match last year’s outcome — from 5.5% because of the expected effects of the pandemic. To support the economy, the central bank has reduced its benchmark rate.

Significant disruptions are emerging in services, transport, agriculture, manufacturing and communications coupled with a much worse external environment affecting export-oriented sectors, such as mining, the fund said. To mitigate the impact of the pandemic and preserve macroeconomic stability, the government has taken several steps to increase health spending, strengthen social protection to the most vulnerable and support micro-businesses and small and medium-sized enterprises, it added.

Separately, S&P Global Ratings affirmed its CCC+ assessment of Mozambique’s foreign debt, saying emergency support from lenders including the IMF will significantly mitigate the nation’s budget and balance-of-payments deficits, helping the country avoid a credit or payment crisis within the next 12 months.

“Mozambique’s economic growth will likely remain weak this year due to reduced economic activity in key sectors following the outbreak of Covid-19, and a slowdown in liquefied natural gas projects,” S&P said.

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