The International Monetary Fund (IMF) has approved a $11m (�7.42m) loan to Mozambique to reduce poverty in the south-eastern African nation.

The loan is part of a $113m Poverty Reduction and Growth facility (PRGF), of which the government has already drawn about $80m, the IMF said.

Mozambique is still struggling to recover from devastating floods in 2000 and 2001 and faces food shortages due to a drought in southern Africa.

The government has appealed for emergency aid and Italy last week cancelled over $500m of its foreign debt.

IMF pleased

"Following the devastating effects of the floods in 2000, Mozambique has resumed the rapid rates of economic growth that are essential to the sustained implementation of the country's ambitious poverty reduction strategy," IMF Deputy Managing Director Shigemitsu Sugisaki said in a statement.

Mr Sugisaki warned a "sharp increase in inflation in 2001 has been a cause for concern".

The PRGF is the IMF's discount loan facility for low-income countries.

The IMF's PRGF programs are funded provided the recipient country complies with the lenders macroeconomic, structural, and social policies.

PRGF loans carry an annual interest rate of 0.5%, and are repayable over 10 years with a 5 -and-a-half year grace period on principal payments.