WASHINGTON, October 22, 2020 — The World Bank approved today a $100 million grant from the International Development Association (IDA) in support of the Government of Mozambique’s COVID-19 (coronavirus) response program. This financing will help mitigate the adverse impacts of the pandemic on people’s lives and livelihoods by supporting the immediate COVID-19 response and supporting businesses and reforms in view of improved fiscal sustainability.
“This financing comes at a critical juncture when the country seeks to close its growing fiscal gap, prevent a prolonged economic fallout from this crisis, and provide support to the most vulnerable,” noted Idah Z. Pswarayi-Riddihough, World Bank Country Director for Mozambique, Madagascar, Mauritius, Comoros, and Seychelles. The operation will provide emergency financing to the Government of Mozambique as it strives to maintain macro-fiscal stability, whilst also supporting small businesses and households manage the impact that social distancing measures are having on their income streams.
This stand-alone Development Policy Operation proposes to mitigate the adverse impacts of COVID-19 outbreak and support a resilient recovery through a two-pronged approach: 1) support for the health sector response, including efforts to ensure continuous access to water for the urban poor and increasing the reach of social safety nets; and 2) support for the economic recovery by improving the conditions for SME access to finance and providing liquidity support to firms and the financial sector. It will also support reforms aimed at strengthening the country’s framework for fiscal and debt sustainability.
“The COVID-19 outbreak reached Mozambique at a particularly weak moment as the country attempted to recover from major shocks, including the debt crisis and the devastating effects of recent cyclones, which makes this operation timely and critical,” added Carolin Geginat, Lead Economist and the operation’s co-team leader. Indeed, the COVID-19 crisis has adversely impacted economic activity, causing growth expectations to decline to -0.4 percent in 2020, down from a pre-COVID-19 forecast of 4.3 percent, with significant downside risks. Mozambique is also expected to experience large external and fiscal financing gaps in 2020 and 2021 in a context characterized by exposure to external shocks and limited fiscal space.
“It’s worth noting that a sizeable number of Mozambicans could fall back into poverty as a result of the pandemic, especially in urban and peri-urban areas,” Shireen Mahdi, Senior Economist and co-team leader. At the same time, existing development challenges such as weak human development outcomes, the infrastructure gap, low financial inclusion, and high debt continue to weigh on the country.
This operation is part of a broader package of support by the World Bank Group to help Mozambique manage and respond to the current crisis in-line with the Bank’s partnership framework, approved in 2017, especially its objectives aimed at: improving health service delivery, improving access to water and sanitation, extending coverage of social protection and labor programs, and improving business environment for job creation, as well as supporting economic management.
*The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs.
The World Bank Group is making available up to $160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.