The Mozambican government has estimated its emergency assistance needs and reconstruction costs following Cyclone Idai, in March, will reach $1.5-billion, or about 10% of the country’s gross domestic product.
The International Monetary Fund (IMF) compiled a report on the incident, including an assessment of the damage and a debt sustainability analysis.
The IMF last month approved an $118-million rapid credit facility to Mozambique. The credit facility was intended to address large budgetary and external financial gaps that arose from reconstruction requirements after the cyclone, which caused the deaths of around 600 people and significant infrastructure damage in Beira.
Additionally, the IMF hoped that the credit facility would play a catalytic role in securing grants from donors and the international community, to which the World Bank had already responded by approving a $90-million grant in support of the government’s disaster risk management and resilience programme.
“The authorities are reallocating lower priority spending to emergency assistance, but their room for manoeuver is limited and the bulk of emergency assistance and reconstruction needs will have to be covered by the international community mostly in the form of grants to ensure debt sustainability.
“The [Mozambican] authorities are committed to creating fiscal buffers, including preparing for, and dealing with, future natural disasters. They are seeking significant debt relief from private creditors, which is important to put public debt on a declining path,” the IMF said.
It added that, while the authorities cautiously proceed with the normalisation of monetary policy, they should remain vigilant about possible second-round effects on inflation of supply shock caused by the cyclone.
The Mozambique government also confirmed that the challenge remains to provide shelter, clean water and food to the hundreds of thousands [of people] displaced, and to keep them healthy. So far, several hundred cases of cholera have been confirmed, but this number is likely to rise significantly.
The cyclone inundated entire neighbourhoods and destroyed most homes, hospitals and schools in Beira. The ensuing floods are estimated to have ruined around 800 000 ha of crops, including for local consumption and export.
The damage to infrastructure has severely impacted productive capacity in key economic sectors in the central region of Mozambique.
Mozambique was, in April, also affected by Cyclone Kenneth, which caused further destruction.
Preliminary projections suggest that the country’s real gross domestic product (GDP) growth for this year would decelerate to a range of 1.8% to 2.8% – down from a precyclone projection of 3.8% – mainly as a result of significant losses to agricultural production and disruptions to transport, electricity, communications and services.
Given the adverse supply shock to food availability in Beira and neighbouring districts, end-of-period inflation is now projected to pick up to 8.5% for this year – up from a precyclone projection of 5.5% – as the metropolitan region of Beira accounts for about one-fifth of the national consumer price inflation.
Growth is expected to rebound and inflation to decelerate in 2020.