Mozambique receives $305.9 million from IMF 'capital increase' today

The Government of Mozambique will receive 216 million Special Drawing Rights (SDR) units, about 261 million euros, according to the distribution proportional to its quota in the International Monetary Fund (IMF).

According to the document that was approved by the IMF board and that will start today to reinforce the foreign exchange reserves of all the Fund's members, Mozambique will receive 216 million SDR units, corresponding to $305.9 million at the current exchange rate.

"The proposal advocates an allocation of $650 billion, about 456 billion SDRs, based on an assessment of member states' long-term reserve requirements, and includes measures to increase transparency and accountability in reporting the use of SDRs, while preserving the characteristics of SDRs," reads an IMF technical note on the issue, which will begin implementation today.

The note goes on to read that "the allocation will help many member states smooth the need to adjust in the face of liquidity constraint and avoid unbalanced policies, while providing room for increased spending on crisis response and vaccines."

Developing countries and emerging markets will receive $275 billion of the total, IMF Managing Director Kristalina Goergieva said on August 2 at the Fund's board approval of the issue.

Member countries began discussing a DES issue as early as last year due to the impact of the covid-19 pandemic, which threw the global economy into a 3.5% recession and is expected to grow by 6% this year, according to forecasts made from the latest World Economic Outlook report.

The DES issue is an instrument created by the IMF to provide liquidity and expand the available resources of states with financial needs, acting as a kind of IMF capital increase to reinforce the fight against the pandemic and relaunch economic growth.

A DES is a unit in which the US dollar has 41.73% of the peso, the euro 30.93%, the Chinese yuan 10.92%, the Japanese yen 8.33%, and the British pound 8.09%, and has a daily quotation published by the IMF.

Angola is the Lusophone African country that will have the most robust allocation, followed by Mozambique, with 261 million euros, Equatorial Guinea (181.6 million), Guinea-Bissau, with 32.6 million, Cape Verde, with 27.8 million, and São Tomé and Príncipe, which will receive almost 17 million euros in foreign reserves.

In total, the Portuguese-speaking African Countries (PALOP) will receive a reinforcement of 1,372.2 million Euros, corresponding to 1,134 million units of SDRs.

The DES issue will help the countries in greatest difficulty to balance their books and strengthen their commitment to fight the spread of the pandemic, and has been described by African countries as essential to revive economic growth in the region.

African countries, particularly those in sub-Saharan Africa, have argued that their share of SDRs is disproportionately less than their needs due to the small IMF quota.

The IMF has argued that the more advanced countries, which are less in need of this 'capital injection', should transfer part of the strengthening of their SDRs to developing countries, and it has been agreed by the major powers to channel at least $100 billion, to the countries with the most difficulties.

Lusa Agency

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