Press release: For immediate release
For further information and interviews please contact Sarah-Jayne Clifton on 07980 599002
The IMF has agreed an emergency loan of $118.2 million to Mozambique following Cyclone Idai. The cyclone, which hit Mozambique in March, has been described by the IMF itself as “the worst and costliest natural disaster ever to strike the country”, with emergency assistance and reconstruction costs estimated as “enormous” [1]. However, despite this assessment, the IMF has ruled that Idai was not damaging enough for Mozambique to qualify for debt relief from the Fund.
Reacting to the loan announcement, Sarah-Jayne Clifton, Director of Jubilee Debt Campaign, said:
“It is a shocking indictment of the international community that a country as impoverished as Mozambique has to borrow from international institutions in order to cope with the devastation caused by Cyclone Idai. Emergency grants should be available to all impoverished countries in response to disasters like Idai, especially those linked to the climate breakdown primarily caused by richer countries in the global North”.
“Mozambique is already suffering from a debt crisis caused by secret loans from London-based banks. The damage from Cyclone Idai is a further reason why these debts should not be paid. Furthermore, the damage from the cyclone means Mozambique is now likely to need relief on other debts as well, including to the IMF, rather than even more loans. It is an appalling judgement that the devastation from Cyclone Idai is not enough to warrant the IMF granting debt relief.”
In recent years the IMF has been making a profit from its lending to middle– and high–income countries. In financial year 2018 it made an operational profit of $550 million and in 2017 $1.3 billion [2]. These surpluses go into the IMF’s reserves. These reserves have increased from $17.5 billion in 2010 [3] to $30 billion as of October 2018.[4]
Loans in response to a disaster can leave countries indebted for many years to come. In 2014, the economy of Sierra Leone, as well as Liberia and Guinea, was devastated by the Ebola crisis. In 2015 following an international campaign, the IMF agreed to cancel $29 million of debt payments by Sierra Leone in 2015 and 2016. However, it also lent almost ten times more – $254 million – between 2015 and 2017. [5]
These loans are due to be repaid over coming years. The IMF now rates Sierra Leone as at high risk of defaulting on its debt. Sierra Leone government debt payments on foreign debt will reach 19% of government revenue by 2022.[6] Austerity introduced in response to this debt crisis means public spending per person in Sierra Leone is projected to fall by 15% by 2019 (on 2016 levels).[7]
Notes
The Jubilee Debt Campaign is a UK charity working to end poverty caused by unjust debt through education, research and campaigning: https://www.jubileedebt.org.uk
For background information on the debt crisis in Mozambique see: https://debtjustice.org.uk/the-uks-role-in-mozambiques-debt-crisis
[2] From https://www.imf.org/External/Pubs/FT/quart/2018fy/043018.pdf page 8. The IMF reports figures in Special Drawing Rights (SDRs). We have converted these amounts into dollars.
[3] From https://www.imf.org/External/Pubs/FT/quart/2011fy/103110.pdf page 4. The IMF reports figures in Special Drawing Rights (SDRs). We have converted these amounts into dollars.
[4] From https://www.imf.org/External/Pubs/FT/quart/2019fy/103118.pdf page 5. The IMF reports figures in Special Drawing Rights (SDRs). We have converted these amounts into dollars.
[5] https://debtjustice.org.uk/press-release/welcome-ebola-debt-relief-warning-impact-new-loans
[6] https://www.imf.org/~/media/Files/Publications/CR/2018/cr18371.ashx
[7] Calculated by Jubilee Debt Campaign from IMF documents.