The IMF, international donors and the World Bank suspended their financial support to Mozambique after it was revealed in April this year that the country had additional undisclosed government debts of over USD 1 billion. According to the IMF, this was one of the largest cases of inaccurate data provision it has seen in Africa in recent times. Mozambique’s current account deficit was already ballooning over the past years due to megaproject investments. As a result, foreign exchange reserves tumbled and incited the central bank of Mozambique to impose restrictive capital controls on hard currency availability. As the country is highly reliant on international donor funds and multilateral aid, the freeze of disbursements is causing a domestic liquidity squeeze and raises the risk of a balance of payments crisis and even a sovereign default. In addition, resurging political violence is encouraging more capital outflows, moving Mozambique’s short-term political risk classification into off-cover category 7.
09 Apr 2021
Mozambique: Enormous investment expectations are weighed down by escalating violent conflict
Event On 24 March, Islamist militants launched an attack on Palma city in Cabo Delgado, home to huge natural gas developments. Thousands fled the ...