JOHANNESBURG: The International Monetary Fund and authorities in Mozambique will begin discussing an extended credit facility for the southern African nation in January, the fund said on Tuesday.

One of the world's most impoverished countries, Mozambique sits on massive gas reserves as it grapples with a hefty debt burden, an Islamist insurgency and the impact of COVID-19.

The programme would aim to help ease financing pressures as Mozambique recovers from the pandemic, support poverty reduction and equitable growth, as well as catalyse additional development financing, the Fund said.

"Staff stand ready to commence negotiations in late January 2022, in accordance with the authorities' preferred timeline," the IMF said in a statement after a staff visit to the country.

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Mozambique suffered its first economic contraction in three decades in 2020, but growth was set to reach 2.2% this year and was projected at 4% in the long term, before accounting for the realisation of hefty liquefied natural gas (LNG) reserves, which should deliver an even sharper increase, the IMF said.

Massive gas finds have seen Mozambique emerge as a potential major global LNG exporter, but graft scandals and the insurgency have dented or threatened the promised benefits.

The IMF warned the long-term outlook was shaped by LNG production but faced risks, such as vulnerability to climate change and a deterioration in the security situation, which could delay or stop LNG projects.

Fiscal pressures are acute, it added, with economic difficulties of state-owned enterprises and public debts at the centre of a corruption scandal representing risks.

Mozambique is disputing in the courts the validity of some of the debt, including a loan of $622 million from investment bank Credit Suisse.