Mozambique is intensifying efforts to restore direct budget support from the World Bank as part of a broader strategy to stabilise its economy, strengthen public finances and address mounting development challenges following a series of economic and climate related shocks.
The renewed push comes as the Southern African nation hosts simultaneous high level visits from both the International Monetary Fund (IMF) and the World Bank, underscoring the importance of ongoing discussions between Maputo and its key international financial partners.
An IMF delegation led by Mission Chief Pablo Lopez Murphy is in Mozambique’s capital, Maputo, from 8 to 12 June to assess the country’s recent economic performance and engage government officials on plans to improve fiscal management and debt sustainability.
According to the IMF, the mission aims to review recent economic developments, evaluate government efforts to strengthen public finances and explore how the Fund can continue supporting Mozambique’s economic reform agenda.
The IMF visit coincides with a visit by senior World Bank officials, who on Tuesday witnessed the signing of five financing agreements worth a combined US$450 million. The funding will support projects in social protection, agriculture, water and sanitation, as well as education and skills development.
At the centre of discussions between Mozambique and the World Bank is the possible resumption of direct budget support, a financing mechanism that was suspended nearly a decade ago following the country’s hidden debt scandal.
The scandal erupted in 2016 after previously undisclosed government backed loans amounting to more than US$2 billion came to light, triggering a financial crisis, the withdrawal of donor support and a loss of confidence among international lenders.
Finance Minister Carla Louveira said negotiations with the World Bank are progressing and that the institution’s Development Policy Operation could be activated once Mozambique meets agreed conditions related to macroeconomic stability, debt sustainability and financial governance.
Speaking to reporters, Louveira said the process is being undertaken in close coordination with both the World Bank and the IMF to ensure that reforms are implemented effectively and that confidence in the country’s economic management continues to improve.
“This is a very close coordination we are having with the Bank,” Louveira said, adding that the issue had been personally raised by President Daniel Chapo during a recent visit to Washington.
The government’s efforts come at a particularly challenging time for Mozambique. Officials say the country has faced multiple economic pressures this year, including severe flooding linked to climate change, which has damaged infrastructure and disrupted livelihoods in several regions.
At the same time, global economic uncertainty and rising energy costs associated with conflict in the Middle East have added further strain to the country’s recovery efforts, increasing pressure on public finances and development programmes.
The newly signed US$450 million financing package forms part of a much larger World Bank partnership framework valued at US$10 billion. Under the programme, approximately US$6 billion has been allocated to support public sector initiatives, while a further US$4 billion is earmarked for private sector investment and development.
Government officials view the partnership as critical to accelerating economic growth, improving public services and strengthening resilience against future economic and climate related shocks.
Analysts say the restoration of direct budget support would represent a significant milestone for Mozambique, signalling renewed confidence from international financial institutions in the country’s reform efforts and governance framework.
If approved, the support could provide much needed fiscal space for the government while helping finance development priorities in sectors that remain essential to long term economic growth and poverty reduction.
