Mozambique: AfDB support to end-2019 capped at $81m due to excessive debt

Financial support from African Development Bank (AfDB) to Mozambique until the end of next year is to be limited to $81 million due to the country’s excessive debt, which hinders sovereign funding access.

According to the Mozambique Country Strategy Paper (CSP) 2018-2022 “the available resources are from the ADF [African Development Fund]-14th cycle (2017-19) of UA [Units of Account] 56.3 million and the next full ADF-15 cycle (2020-22), as well as the financing through the AfDB window for non-sovereign projects”

Over 79 pages of the document, analysts make clear that “Mozambique cannot currently access the AfDB sovereign window due to the unsustainability of public debt”. However, they highlight that “the Government implements fiscal consolidation and negotiate with creditors for a debt restructuring, and the first batch of gas production comes on line to boost GDP, credit conditions might evolve over the course of the CSP”

Explaining that the “document leaves open the possibility of an eventual access to the AfDB sovereign window in the outer years of the strategy period”. And the “limited financial envelope” means that “CSP emphasizes co-finacing and resource mobilization as key element of delivery.”

Mozambique’s excessive debt-to-GDP ratio is one of the main obstacles cited by the authors of the document, which was approved by the AfDB Board in the beginning of August after dialogue with Mozambican Government.

“In accordance with the Bank’s new credit policy, Mozambique is not in a position to be eligible for accessing sovereign non-concessional ADB resources” for which a “que is not in a position to be eligible for accessing sovereign non-concessional ADB resources. Close dialogue with the GoM will be undertaken to assist in addressing key macroeconomic constrains, in particular debt management and effective domestic resource mobilization, in particular regarding the Natural Resources sector, towards the long-term aspiration of accessing AfDB sovereign funding.”.

For that, “focus is placed on leveraging Private Sector funding, including through platforms such as the African Investment Forum” taking place in November in Johannesburg, and access to international mechanisms like the Agricultural Transformation (TAAT) initiative, EU funds and the Global Climate Fund.

 Ref – Source: Lusa – Club O f Mozambique