It should be easier for importers to make payments in foreign exchange following the granting of debt relief to the Mozambican government in terms of the Debt Service Suspension Initiative (DSSI).“The Government of the Republic of Mozambique is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the Covid crisis,” according to an official statement announcing the debt relief.Mozambique is among the countries that was facing a debt crunch before the onset of the Covid-19 pandemic. According to the World Bank, rising public debt levels were already a cause for concern, particularly in many of the world’s poorest countries.According to the Bank’s 2021 international debt statistics (IDS) report, the total external debt of DSSI-eligible countries climbed 9.5% to a record $744 billion in 2019 from the previous year, highlighting an urgent need for creditors and borrowers alike to collaborate to stave off the growing risk of sovereign-debt crises triggered by the Covid-19 pandemic. “The pace of debt accumulation for these countries was nearly twice the rate of other low- and middle-income countries in 2019,” according to the report.It shows that Mozambique’s total external debt (private and public sectors) has grown from US$6.09 billion in 2009 to US$20.6 bn in 2019.There is however some good news. The International Monetary Fund (IMF) sees the Mozambican government taking control of the debt. According to a May 1 assessment, the IMF estimates that, after representing 108.4% at the end of 2019, public debt is expected to reach 113.7% of GDP in 2020 and 113.1% in 2021.It will then start to fall, down to 106.2% in 2022, according to IMF calculations.
Debt relief expected to support economy
22 Oct 2020 - by Liesl Venter and Ed Richardson
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Mozambique Feature October 2020
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