Mozambique wins further debt relief

Over one million people live in the capital Maputo

The IMF and World Bank have agreed to give Mozambique $600m in special relief to ease its debt servicing burden.

The country had taken the required steps to complete a program under the so-called enhanced Heavily Indebted Poor Countries Initiative (HIPC).

Debt relief is now the equivalent of 6% of our exports against 24% previously

Finance Minister Louisa Diago

The programme was drawn up to ease the debt burden of the world's poorest countries.

As a result of assistance and bilateral debt relief already committed, Mozambique's total external debt has been reduced by 73%.

Additional bilateral relief could raise that figure.

Conditions imposed

Countries qualifying for the initiative must complete an action plan for the reduction of absolute poverty, implement strong IMF-supported economic policies and pursue robust social policies.

Some three dozen poor countries, mostly in sub-Saharan Africa, are expected to qualify for assistance under the initiative.

Louisa Diago, Mozambique's finance minister, told World Business Report that the country's debt has been reduced from $6bn in 1998 to around $1.5bn now.

"Debt relief is now the equivalent of 6% of our exports against 24% previously," she said.

This reduction means that the amount paid on debt servicing has been reduced from $200m to $55m a year.

But, she added: "It is still a burden on our budget to service $55m, especially when our total expenditure on our health sector is only $35m."

Co-operation sought

Ms Diago said that Mozambique will not be "asking" for further help, but would be working with donors and creditors to see how much they could additionally support the country.

Portugal's central bank has predicted that Mozambique's economy would grow 10.4% this year as the southern African country recovered from last year's floods.

Before last year's heavy rains, which killed 700 people and made half a million homeless, the economy had grown by 10% for three years in a row.