IMF calls for urgent action as Mozambique's growth dips

The International Monetary Fund has called for urgent action to stem Mozambique's deteriorating economic performance, after revelations of $1.4 billion in hidden debt saw donor nations suspending aid to the country.

In a statement released Friday, the IMF recommended "an urgent and decisive package of policy measures to avoid a further deterioration in economic performance".

Mozambique's growth is forecast to drop to 4.5 percent this year down from 6.6 percent last year while rising inflation reached 16 percent in May.

The local currency, the metical, has depreciated by 28 percent since the beginning of the year.

"In addition, the discovery in April of $1.4 billion of previously undisclosed loans has pushed the total stock of debt at end-2015 to 86 percent of GDP," IMF assistant director Michael Lazare said.

"According to our technical assessment, public debt is now likely to have reached a high risk of distress."

The IMF said in April it had suspended aid to the southern African country "pending a full disclosure and assessment of the facts".

On Friday the organisation said important steps had been taken to investigate the undisclosed debt, but called for "an international and independent audit" of the state companies behind the controversy.

One of the 10 poorest countries in the world, Mozambique has been hit hard by falling commodity prices.

The government said tensions with the Renamo opposition group, which waged a 16-year civil war that ended in 1992, were behind its decision to hide the debt.

Clashes between government forces and Renamo have increased since February, with attacks reported almost daily and key roads often closed due to the unrest.