Mozambique is one of the poorest countries in Africa and has to some extent solely depended on donors for its various projects.

A Reuters report quoted IMF’s representative Felix Fischer as saying that the loan would be payable in 10 years after an interest-free grace period of five years.

Many countries in Africa have seen their economy suffer due to the global financial crisis and IMF said the loan is expected to cushion the effects of the economic slowdown.

"The IMF financing will help Mozambique offset the deterioration of its balance of payments, which has been undermined by the global economic downturn," said Fischer.

The approval was made following a visit by IMF’s executive board, which completed a review of Mozambique's economic performance under the three-year Policy Support Instrument (PSI) approved in June 2007.

The country suffered a civil war which led to the destruction of many of its important infrastructure.

However, over the past years the country has made progress and recently it announced that it was boosting its tourism sector in order to attract more tourists ahead of the 2010 World Cup in South Africa.

The country is also set to host the 2011 All Africa Games.